EBF 301
Global Finance for the Earth, Energy, and Materials Industries

EBF 301 Syllabus, Fall 2018

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Welcome to Global Finance for the Earth, Energy, and Materials Industries, Fall 2018

This syllabus is divided into several sections. You can read it sequentially by scrolling the length of the document or by clicking on any of the links below to “jump” to specific sections. It is essential that you read the entire document as well as material covered in the course Orientation. Together, these serve as our course "contract."

Instructor

Farid Tayari, Ph.D.
Instructor
Energy Management and Policy
131 Hosler Building
Department of Energy and Mineral Engineering
College of Earth and Mineral Sciences
The Pennsylvania State University
University Park, PA 16802

Office Hours
Tuesday: 11 am – 2 pm
Wednesday: 11 am – 2 pm 
Thursday: 11 am – 2 pm
Monday & Friday: with appointment

Course Communication and Discussion Forum: I would strongly recommend you to read the Discussion Forum frequently and participate. If you have any question and can’t find the answer in the Discussion Forum, try to post it there, first. We monitor the discussion forum and respond to posts there. Your questions and answers might be very helpful for other students. Please do NOT discuss any homework or quiz question and solution directly in the Discussion Forum.

Please try the Discussion Forum first and see if you can find your answer there. You can contact your lecturer in charge, Farid Tayari through the course email system in Canvas. Always send correspondence to All Course Faculty to ensure that any course assistants also receive the note.

Teaching Assistant

Office Hours: with appointment

Final exam

This course may require you to take exams using certain proctoring software that uses your computer’s webcam or other technology to monitor and/or record your activity during exams. The proctoring software may be listening to you, monitoring your computer screen, viewing you and your surroundings, recording and storing any and all activity (including visual and audio recordings) during the proctoring process. By enrolling in this course, you consent to the use of the proctoring software selected by your instructor, including but not limited to any audio and/or visual monitoring which may be recorded. Please contact your instructor with any questions.

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Course Overview

Description: The aim of this course is to introduce fundamental concepts of physical and financial energy commodity trading.

Prerequisites: None

The course will cover the physical and financial aspects of the following energy commodities – crude, natural gas, natural gas liquids, gasoline, and power. The physical “path” of each commodity from the point of production to the point of use will be explained, as well as, the “value chain” that exists for each. Commodity market pricing, both cash and financial, will be presented, encompassing industry “postings” for cash, commodity exchanges, and “over-the-counter” markets. The use of financial derivatives to reduce market price risk (“hedging”) will be presented, and “real world” examples will be utilized.

The course will largely be comprised of online narrative, audio lectures, and required readings. Students will use standard pricing and hedging models to work “real world” problems from both producer and consumer perspectives. There will also be several case studies presented involving disastrous trading results where a lack of risk controls were present.

What I Expect of You

On average, most students spend seven to nine hours per week working on course assignments. Your workload may be more or less depending on your study habits.

I have worked hard to make this the most effective and convenient educational experience possible. The Internet may still be a novel learning environment for you, but in one sense it is no different from a traditional college class: how much and how well you learn is ultimately up to you. You will succeed if you are diligent about keeping up with the class schedule and if you take advantage of opportunities to communicate with me and with your fellow students.

Course Goals and Learning Objectives

When you successfully complete this course, you will be prepared to:

  1. understand the nature of energy commodity logistics, i.e., the ways in which energy production is delivered to the ultimate consumer;
  2. establish costs and revenues associated with the movement of energy commodities from point of production to point of consumption, (the so-called economic “value chain”);
  3. describe market pricing both “cash” and financial, including how prices are established; identify key industry pricing publications, financial exchanges, and “over-the-counter” markets;
  4. define energy financial derivatives, including futures, forwards, swaps, spreads and options; illustrate how they are traded and their use for “hedging” market price risk and which industry segments utilize them;
  5. list the “do’s and don’ts” of energy commodity trading, i.e., risk controls and trading limits.

EBF 301 will be conducted entirely on the World Wide Web. There will be no set class meeting times, but you will be required to complete weekly assignments. The content of this course is divided into 12 lessons. Each lesson will be completed in approximately 1 week (subject to change). All assignments will be due Sunday, 11:59 p.m. Eastern Time on the week assigned.

Specific learning objectives for each lesson and project are detailed within each lesson. The class schedule is published below.

Recommended Course Materials

The following text books are optional.

  1. Fundamentals of Trading Energy Futures & Options, 2nd Edition, Steven Errera and Stewart L. Brown. Pennwell, 2002. ISBN 0-8714-836-1. (Core text on trading.) You may purchase the text through your favorite local or online bookseller. You can also read the text online through the University Library.
  2. Energy Trading & Investing: Trading, Risk Management, and Structuring Deals in the Energy Markets, 2nd Edition, Davis W. Edwards, McGraw-Hill, 2017. ISBN-13: 978-1259835384,  ISBN-10: 1259835383.

All additional materials needed for this course are presented online through this course website and on Canvas. In order to access all materials, you need to have an active Penn State Access Account user ID and password (used to access the online course resources). If you have any questions about obtaining or activating your Penn State Access Account, please contact the Outreach Helpdesk (if you are a World Campus student) or the Penn State HelpDesk if you are a resident student.

Assignments and Grading

EBF 301 will rely upon a variety of methods to assess and evaluate student learning, including:

  • Quizzes allow you to demonstrate your mastery of the terms and concepts in the lessons. Quizzes are closed-book examinations taken online through Canvas. Each quiz will be 20 minutes in length and will require you to answer 10 multiple choice questions. Feedback on quizzes will be available for a 24-hour period after the quiz closes. You will not be able to view quiz feedback beyond this 24 hour period.
  • Lesson Activities will ask interpretive questions on each week's material.
  • Fundamental Factors assignments ask you to research and think about how current events affect prices in energy commodity markets.
  • Mid-term Exam and Final Exam evaluate your ability to synthesize and apply terms and concepts from throughout the course.
Assignment contributions to the overall course grade
Assignment Total Points
Quizzes 100
Lesson Activities 160
Midterm Exam 250
Fundamental Factors 240
Final Exam 250

Final exam

This course may require you to take exams using certain proctoring software that uses your computer’s webcam or other technology to monitor and/or record your activity during exams. The proctoring software may be listening to you, monitoring your computer screen, viewing you and your surroundings, recording and storing any and all activity (including visual and audio recordings) during the proctoring process. By enrolling in this course, you consent to the use of the proctoring software selected by your instructor, including but not limited to any audio and/or visual monitoring which may be recorded. Please contact your instructor with any questions.

Course Policy on Make-Up Work and Late Work

All assignments are due by 11:59 pm Eastern Time on Sunday evenings. No late assignments will be accepted under any circumstances, even if students ask permission in advance. My policy for this course is that instead of accepting late work, I will drop the lowest two scores for each of the quizzes, lesson activities and the fundamental factors activities. Students should reserve these dropped scores in case of illness, work-related conflicts, or technical difficulties in submission. In particular, students should be very clear that technical problems such as computer, software, or Internet issues are not acceptable excuses for handing in late work.

Make-up exams will not be offered except in the case of University-excused absences. Such absences should be cleared with the instructor at least 72 hours prior to the start of the examination period.

Grades

Each type of assignment has a rubric that will be posted on Canvas and will be used for grading. Feedback on the Lesson Activities and Fundamental Factors will be available to students through Canvas.

Quiz questions are all multiple choice and are thus either correct or incorrect. Feedback on quizzes and exams will be available to students for a 24 hour period after the quiz and exam closes. Students should plan to check their quiz feedback during this time window and this time window only.

I will use the Canvas gradebook to keep track of your grades. You can see your grades in the gradebook, too, by clicking the Reports tab in Canvas, then choosing "Grades" from the "Category" dropdown menu, then clicking "Run." Overall course grades will be determined as follows.

Letter Grade and Corresponding Percentages
Letter Grade Total Points
A 93.0 - 100.0
A- 90.0 - 92.9
B+ 87.0 - 89.9
B 83.0 - 86.9
B- 80.0 - 82.9
C+ 77.0 - 79.9
C 70.0 - 76.9
D 60.0 - 69.9
F < 60.0
X Unsatisfactory (student did not participate)

EBF 301 Course Schedule

imagePrintable Schedule

Below you will find a summary of the primary learning activities for this course and the associated time frames. All assignments will be due Sunday, 11:59 p.m. Eastern Time on the week assigned.

Course Orientation
Topics
  • The structure of EBF 301.
  • An overview of Canvas, Penn State's course management system.
  • Technical requirements for EBF 301.
  • How to succeed in this course.
  • Where to get course assistance if you need it.
Assignments
  • Perform tasks outlined in course orientation to become familiar with the course and the course environment.
  • Take the Course Information Quiz and pass with a score of 80% in order to gain access to future quizzes, etc.
Lesson 1: The Energy Industry - Overall Perspective
Topics
  • Describe the major sources of energy in the United States.
  • Outline the energy production/consumption environment.
  • Explain what is meant by “renewable” vs. “non-renewable” energy.
  • Evaluate the pros and cons of 5 different types of alternative fuels including the cost to produce, emissions profile, feedstock and likelihood of increased use.
  • List the main fossil fuels.
  • Critically assess the pros and cons of each type.
Assignments
  • Read Lesson and complete all assigned material.
Lesson 2: Supply/Demand Fundamentals for Natural Gas & Crude Oil
Topics
  • Recognize the various factors impacting supply & demand for natural gas & crude oil.
  • Research major supply/demand influences:
    • global economy
    • domestic economy
    • weather
    • currencies
    • energy commodity relationships
    • inventory and storage reports
  • Assess the potential impact on market pricing for each factor researched.
Assignments
  • Read Lesson and complete all assigned material.
Lesson 3: The New York Mercantile Exchange (NYMEX) & Energy Contracts
Topics
  • Explain the history and development of the Exchange.
  • Know the commodities traded.
  • Identify the components of a standard NYMEX contract.
  • Know the difference between “pit” and electronic trading.
  • Recognize various exchange “floor” personnel and players.
  • List the specific contract provisions for:
    • natural gas
    • crude oil
    • heating oil
    • unleaded gasoline
  • Describe the importance of the “price discovery” function provided by the Exchange for energy commodities.
Assignments
  • Read Lesson and complete all assigned material.
Lesson 4: Cash Market Pricing Methodologies & Publications
Topics
  • Summarize the history of the natural gas “cash” market pricing.
  • Outline the methodology for cash price determination.
  • Explain the relationship between futures and spot market prices.
  • Describe the relationship between futures contracts expiring in different months.
  • Explain the arbitrage and situation that arbitrage can be utilized.
  • Summarize the key industry pricing publications and their uses.
  • Describe historical price trends.
  • Discover online price data resources.
Assignments
  • Read Lesson and complete all assigned material.
Lesson 5: - Crude Oil Logistics & Value Chain
Topics
  • Define the steps in the movement of crude oil from the wellhead to the end-user (“pump-to-pump” path).
  • Recognize the “value chain” along the path.
  • Explain the general methods of transporting crude oil from well to refinery.
  • Outline the crude refining processes and their refined products.
Assignments
  • Read Lesson and complete all assigned material.
Lesson 6: Natural Gas Logistics & Value Chain/US LNG Exports & Global Markets
Topics
  • Define the steps in the movement of natural gas from the wellhead to the end-user (“wellhead-to-burner tip” path).
  • Recognize the “value chain” along the path.
  • Explain the general methods of transporting natural gas from well to end user:
    • gathering
    • processing & natural gas liquids (NGLs)
    • pipeline
    • storage
    • distribution/end use
  • Describe both the domestic and global markets for LNG.
Assignments
  • Read Lesson and complete all assigned material.
Mid-Term Exam 
Assignments
  • Instructor will notify you via email announcement regarding the completion of the Mid-Term Exam.
Lesson 7: Energy Risk “Hedging” using Financial Derivatives
Topics
  • Explain how price risk reduction can occur through the use of basic financial derivatives like NYMEX contracts and “basis swaps”.
  • Describe how commodity risk can be reduced.
  • Demonstrate a simple “hedge” structure for:
    • energy commodity producers;
    • energy commodity consumers;
    • storage.
Assignments
  • Read Lesson and complete all assigned material.
Lesson 8: Quantitative Methods and Energy Risk Management
Topics
  • Interpret the standard deviation of the price.
  • Interpret the volatility of the price.
  • Calculate the moving standard deviation for price data.
  • Calculate the moving volatility for price data.
  • Distinguish between high and low volatility in the prices.
  • Define and calculate the correlation for given price data.
Assignments
  • Read Lesson and complete all assigned material.
Lesson 9: Technical Analysis
Topics
  • Distinguish the difference between technical and fundamental market analysis.
  • Identify different types of technical charts and their uses.
  • Recognize trendlines and market signals.
  • Analyze “momentum” indicators.
Assignments
  • Read Lesson and complete all assigned material.
Lesson 10: Advanced Financial Derivatives - Swaps, Spreads, and Options
Topics
  • Explain the following financial derivatives and their uses:
    • swaps
    • spreads
  • Apply advanced financial derivatives to energy commodity hedging.
  • Understand energy options, types and uses:
    • call options
    • put options
    • hedging with options
  • List the components of an options contract.
  • Outline the inputs to the Black-Scholes Model for options valuation.
Assignments
  • Read Lesson and complete all assigned material.
Lesson 11: Risk Controls in Energy Commodity Trading
Topics
  • Explain famous case studies prompting risk control measures.
  • Describe how and why risk controls were implemented in the energy industry.
  • Define risk control responsibilities and key risk measures.
  • Be able to recognize a proper risk control structure.
Assignments
  • Read Lesson and complete all assigned material.
Lesson 12: Risk Management in the Electricity Market
Topics
  • Explain the basics of electricity market and its differences comparing to other energy commodity markets.
  • Outline electricity market reform.
  • Define the RTO’s role in the electricity market.
  • Describe the uniform price auction mechanism.
  • Be able to recognize the temporal and locational risks in the electricity market.
  • Demonstrate the financial instruments being used for arbitrage and hedging purposes:
    • virtual bidding
    • spark spread
    • financial transmission rights
    • contracts for differences
Assignments
  • Read Lesson and complete all assigned material.
Final Exam OPENS
Topics
  • Review for Final Exam, direct any final questions to instructor.
  • Instructor will notify you via email announcement regarding the completion of the Final Exam.

Late Policy

This course has a policy of not accepting late work. Requests to accept late homework due to illness, professional work obligations, or technology problems (such as malfunctioning computers or internet connections) will not be honored. Rather than accepting late submissions on a case by case basis, my policy in this course is that I will drop the lowest two quiz scores, Fundamental Factors scores, and Lesson Activity scores. Dropping these low scores is the course policy for accommodating situations that may keep students from completing work on time. Before starting this course be sure that you will have reliable Internet and computing access for the entire twelve-week term and will not have professional work obligations that will keep you away from the course for more than a couple of days.  All assignments will be due Sunday, 11:59 p.m. Eastern Time on the week assigned. Consider each lesson to be one week of the semester unless otherwise notified to the contrary. Course lessons are available to you in advance. It is your responsibility to plan ahead and work ahead if necessary to accommodate your personal or professional schedule. This flexibility is one of the great features of online learning. Take advantage of it!

Keeping up with the course

This course consists of twelve segments or "lessons" and one lesson will be opened per week. Students should expect to keep up with weekly work requirements as the course unfolds. Perhaps you have taken other classes online or in person where you could complete the coursework entirely at your own pace. This course is not like that. It is each student's responsibility to keep up with the weekly lessons on time.

Citation and Reference Style

Please refer to the citation style guide for help on citing sources.

Class Communication Guidelines

Please review our class communication guidelines and familiarize yourself with my expectations for interacting with me, your TA, and your classmates.

Technical Requirements

For this course, we recommend the minimum technical requirements outlined on the Dutton Institute Technical Requirements page, including the requirements listed for same-time, synchronous communications. If you need technical assistance at any point during the course, please contact the HelpDesk (for World Campus students) or the IT Service Desk (for students at all other campus locations).

Internet Connection

Access to a reliable Internet connection is required for this course. A problem with your Internet access may not be used as an excuse for late, missing, or incomplete coursework. If you experience problems with your Internet connection while working on this course, it is your responsibility to find an alternative Internet access point, such as a public library or Wi-Fi ® hotspot.

Mixed Content

This site is considered a secure web site which means that your connection is encrypted.  We do however link to content that isn't necessarily encrypted.  This is called mixed content.  By default, mixed content is blocked in Internet Explorer, Firefox, and Chrome.  This may result in a blank page or a message saying that only secure content is displayed.  Follow the directions on our Technical Requirements page to view the mixed content.

Penn State E-mail Accounts

All official communications from the Penn State World Campus are sent to students' Penn State e-mail accounts. Be sure to check your Penn State account regularly, or forward your Penn State e-mail to your preferred e-mail account, so you don't miss any important information.

Academic Integrity

This course follows Penn State's College of Earth and Mineral Sciences Academic Integrity Guidelines. Penn State defines academic integrity as "the pursuit of scholarly activity in an open, honest and responsible manner." Academic integrity includes "a commitment not to engage in or tolerate acts of falsification, misrepresentation, or deception." In particular, the University defines plagiarism as "the fabrication of information and citations; submitting others' work from professional journals, books, articles, and papers; submission of other students' papers, lab results or project reports and representing the work as one's own." Penalties for violations of academic integrity may include course failure. To learn more, see Penn State's Academic Integrity training. 

Course Copyright

All course materials students receive or to which students have online access are protected by copyright laws. Students may use course materials and make copies for their own use as needed, but unauthorized distribution and/or uploading of materials without the instructor’s express permission is strictly prohibited. University Policy AD 40, the University Policy Recording of Classroom Activities and Note Taking Services addresses this issue. Students who engage in the unauthorized distribution of copyrighted materials may be held in violation of the University’s Code of Conduct, and/or liable under Federal and State laws.

For example, uploading completed labs, homework, or other assignments to any study site constitutes a violation of this policy.

Accommodations for Students with Disabilities

Penn State welcomes students with disabilities into the University's educational programs. Every Penn State campus has an office for students with disabilities. The Office for Student Disability Resources website provides contact information for Campus Disability Coordinators at every Penn State campus. For further information, please visit the Office for Student Disability Resources website

In order to receive consideration for reasonable accommodations, you must contact the appropriate disability services office at the campus where you are officially enrolled. You will participate in an intake interview and provide documentation. See documentation guidelines at Applying for Services from Student Disability Resources. If the documentation supports your request for reasonable accommodations, your campus’s disability services office will provide you with an accommodation letter. Please share this letter with your instructors and discuss the accommodations with them as early in your courses as possible. You must follow this process for every semester that you request accommodations.

Counseling and Psychological Services

Many students at Penn State face personal challenges or have psychological needs that may interfere with their academic progress, social development, or emotional wellbeing.  The university offers a variety of confidential services to help you through difficult times, including individual and group counseling, crisis intervention, consultations, online chats, and mental health screenings.  These services are provided by staff who welcome all students and embrace a philosophy respectful of clients’ cultural and religious backgrounds, and sensitive to differences in race, ability, gender identity and sexual orientation.  Services include the following:

Counseling and Psychological Services at University Park  (CAPS): 814-863-0395
Counseling Services at Commonwealth Campuses
Penn State Crisis Line (24 hours/7 days/week): 877-229-6400
Crisis Text Line (24 hours/7 days/week): Text LIONS to 741741

Reporting Bias-Motivated Incidents

Penn State takes great pride to foster a diverse and inclusive environment for students, faculty, and staff. Acts of intolerance, discrimination, or harassment due to age, ancestry, color, disability, gender, gender identity, national origin, race, religious belief, sexual orientation, or veteran status are not tolerated (Policy AD29 Statement on Intolerance) and can be reported through Educational Equity via Report Bias.

Military Personnel

Veterans and currently serving military personnel and/or spouses with unique circumstances (e.g., upcoming deployments, drill/duty requirements, disabilities, VA appointments, etc.) are welcome and encouraged to communicate these, in advance if possible, to the instructor in the case that special arrangements need to be made.

Inclement Weather

In case of weather-related delays at the University, this online course will proceed as planned. Your instructor will inform you if there are any extenuating circumstances regarding content or activity due dates in the course due to weather delays. If you are affected by a weather-related emergency, please contact your instructor at the earliest possible time to make special arrangements.

Connect Online with Caution

Penn State is committed to educational access for all. Our students come from all walks of life and have diverse life experiences. As with any other online community, the lack of physical interaction in an online classroom can create a false sense of anonymity and security. While one can make new friends online, digital relationships can also be misleading. Good judgment and decision making are critical when choosing to disclose personal information to others whom you do not know.

Deferred Grades

If you are prevented from completing this course within the prescribed amount of time for reasons that are beyond your control, it is possible to have the grade deferred with the concurrence of the instructor, following Penn State Deferred Grade Policy 48-40. To seek a deferred grade, you must submit a written request (by e-mail or U.S. post) to the  instructor describing the reason(s) for the request. Non-emergency permission for filing a deferred grade must be requested before the beginning of the final examination period.  It is up to the instructor to determine whether or not you will be permitted to receive a deferred grade. If permission is granted, you will work with the instructor to establish a communication plan and a clear schedule for completion within policy.  If for any reason, the coursework for the deferred grade is not complete by the assigned time, a grade of "F" will be automatically entered on your transcript.

Attendance

This course will be conducted entirely online. There will be no set class meeting times, but you will be required to complete weekly assignments with specific due dates. Many of the assignments are open for multiple days, so it is your responsibility to complete the work early if you plan to travel or participate in national holidays, religious observances or University approved activities.

If you need to request an exception due to a personal or medical emergency, contact the instructor directly as soon as you are able. Such requests will be considered on a case-by-case basis.

Diversity, Inclusion, and Respect

Penn State is “committed to creating an educational environment which is free from intolerance directed toward individuals or groups and strives to create and maintain an environment that fosters respect for others” as stated in Policy AD29 Statement on Intolerance. All members of this class are expected to contribute to a respectful, welcoming and inclusive environment and to interact with civility.

For additional information, see:

Mandated Reporting Statement

Penn State’s policies require me, as a faculty member, to share information about incidents of sex-based discrimination and harassment (discrimination, harassment, sexual harassment, sexual misconduct, dating violence, domestic violence, stalking, and retaliation) with Penn State’s Title IX coordinator or deputy coordinators, regardless of whether the incidents are stated to me in person or shared by students as part of their coursework. For more information regarding the University's policies and procedures for responding to reports of sexual or gender-based harassment or misconduct, please visit Penn State's Office of Sexual Misconduct Prevention & Response website.

Additionally, I am required to make a report on any reasonable suspicion of child abuse in accordance with the Pennsylvania Child Protective Services Law.


Disclaimer

Please note that the specifics of this Course Syllabus can be changed at any time, and you will be responsible for abiding by any such changes. All changes will be communicated with you via e-mail, course announcement and/or course discussion forum.