9780470019108

Commodity Derivatives : Markets and Applications

by
  • ISBN13:

    9780470019108

  • ISBN10:

    0470019107

  • Edition: 1st
  • Format: Hardcover
  • Copyright: 12/17/2007
  • Publisher: WILEY
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Summary

In Commodity Derivatives: Markets and Applications, Neil Schofield provides a complete and accessible reference for anyone working in, or studying commodity markets and their associated derivatives. Dealing primarily with over the counter structures, the book provides extensive coverage of both hard and soft commodities, including gold, crude oil, electricity, plastics, emissions and agriculturals.Using structures unique to the individual market, each chapter includes an explanation of the commodity and an analysis of its physical market, discussion on the typical patterns of demand and supply and the main factors that will influence the price of the commodity, and the main products.Each chapter focuses on how the products could be used along the physical supply chain and seeks to identify the main market risks and how they can be hedged. The book then brings into perspective how the structuring banks hedge their own resultant exposure and examines the attraction of OTC investment structures for the wholesale market.Commodity Derivatives: Markets and Applications is essential reading for those wishing to learn about the main features of the commodity markets, the mechanics of derivatives, and how they are applied.

Author Biography

Neil C. Schofield is currently the head of Financial Markets Training at Barclays Capital, where he has global responsibility for all aspects of the bank’s product-related training. As part of the job, he regularly delivers training on a wide range of subjects in commodities, fixed income, equity, foreign exchange and credit.
Prior to joining Barclays, he was a director at Chisholm Roth, a financial training company, where he delivered seminars to a blue-chip client base around the world. He has also worked in a training capacity for Chase Manhattan bank from 1988 to 1997. The author was appointed as a visiting fellow at ICMA Centre, Reading University, England in April 2007.

Table of Contents

Preface
Acknowledgements
About the Author
An Introduction to Derivative Products
Forwards and futures
Swaps
Options
Derivative pricing
Relative Value
The spot-forward relationship
Deriving forward prices: market in contango
Deriving forward prices: market in backwardation
The spot-forward-swap relationship
The spot-forward-option relationship
Put-call parity: a key relationship
Sources of value in a hedge
Measures of option risk management
Delta
Gamma
Theta
Vega
Risk Management
Categories of risk
Defining risk
Credit risk
Commodity market participants: the time dimension
Short-dated maturities
Medium-dated maturities
Longer-dated exposures
Hedging corporate risk exposures
A framework for analysing corporate risk
Strategic considerations
Tactical considerations
Bank risk management
Hedging customer exposures
Forward risk management
Swap risk management
Option risk management
Correlation risk management
View-driven exposures
Spot-trading strategies
Forward trading strategies
Single period physically settled "swaps."
Single or multi-period financially settled swaps
Option-based trades: trading volatility
Gold
The market for gold
Physical Supply Chain
Financial Institutions
The London gold market
The price of gold
Fixing the price of gold
Gold price drivers
The supply of gold
Demand for gold
The Chinese effect
The gold leasing market
Applications of derivatives
Producer strategies
Central Bank strategies
Base Metals
Base metal production
Aluminium
Copper
London metal exchange
Exchange-traded metal futures
Exchange-traded metal options
Contract specification
Trading
Clearing
Delivery
Price drivers
Structure of market prices
Description of the forward curve
Are forward prices predictors of future spot prices?
Applications of derivatives
Hedges for aluminium consumers in the automotive sector
Forward purchase
Borrowing and lending in the base metal market
Vanilla option strategies
Synthetic long put
Selling options to enhance the forward purchase price
"Three way."
Min-max
Ratio min-max
Enhanced risk reversal
Structured option solutions
Knock-out forwards
Forward plus
Bonus forward
Basket options
5 Crude Oil
The value of crude oil
Basic chemistry of oil
Density
Sulphur content
Flow properties
Other chemical properties
Examples of crude oil
An overview of the physical supply chain
Refining crude oil
Applications of refined products
The demand and supply for crude oil
Proved oil reserves
R/P ratio
Production of crude oil
Consumption of crude oil
Demand for refined products
Oil refining capacity
Crude oil imports and exports
Se
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