Energy Trading and Risk Management A Practical Approach to Hedging, Trading and Portfolio Diversification

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  • Format: Hardcover
  • Copyright: 4/28/2014
  • Publisher: Wiley
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Supplemental Materials

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A leading authority presents a comprehensive overview of trading and risk management in the energy markets

This new book from a respected consultant, lecturer, and former energy trader offers thorough coverage of energy markets and their principal applications in hedging risk, trading for profits, and diversifying investment portfolios. It covers exchange-traded as well as over-the-counter derivatives, including forwards, futures, and swaps for professionals in both the energy and financial industries. The book includes supplementary materials for use in classrooms, workshops, lectures, and in online training, including current case studies, problem sets and answers, trading models and risk management tools, and coverage of regulations based on geographical regions.

  • Includes comprehensive explanations of energy markets for finance and energy industry practitioners, students, and educators
  • Written Iris Mack, MIT professor and former energy trader

For professionals who need a complete understanding of how energy markets work, Energy Trading and Risk Management is an ideal introduction to the topic.

Table of Contents

Overview of the Energy Industry: The Big Picture
• Why Invest in the Energy Markets?
• Timeline: Historical Evolution
• Glossary of Key Industry Terms
• Market Participants
• Challenges/Opportunities Associated With Energy Markets
• Ethical Issues

Energy Markets Fundamentals
• Spot Prices
• Basis Prices
• Forward Prices
• Regulations
• Dodd-Frank “Cheat Sheet” for Traders
• Liquidity
• Load Models
• Parity Value
• Settlement
• Mark-to-market

Energy Pricing Models
• Quant Models in the Energy Markets: Role and Limitations
• Spot Price Models
• Basis Price Models
• Load Models
• Forward Price Models
• West Texas Intermediate (WTI) forward curve
• Contango
• Backwardation
• One Factor Models
• Multi-factor Models
• Multi-commodity Models
• Cheapest-to-Deliver
• Model Calibration

Energy Derivatives Pricing Models
• Energy Derivatives Quant Models: Role and Limitations
• European Options
• American Options
• American Cash or Nothing Options
• Perpetual American Options
• Asian Options
• Fixed Strike Asian Call Options
• Average Price Options
• Swing Options
• Barrier Options
• Digital Options
• Exotic Options
• Swaps
• Swaptions
• Refineries as Real Options
• Multi-asset Options
• Compound Options
• Baskets
• Best-of
• Worst-of
• Spread Options
• Spark Spreads
• Crack Spreads
• Basis Spreads
• Natural Gas Transportation as a Locational Spread
• Generation Assets as Strips of Spark Spreads
• Natural Gas Storage as a Basket of Calendar Spreads

Hedging (Risk Management)
• Real-time Risk Management
• How Risk Management and Best Practice Have Evolved
• Regulatory Developments for Risk Management
• How Risk Management Can Make a Competitive Difference
• Pre-trade Risk Control
• Managing Technical Glitches
• Types of Risk
• Market
• Price
• Volatility
• Correlation
• Liquidity
• Commodity
• Capacity
• Delivery
• Storage
• Transmission
• Human
• Credit
• Management
• Modeling
• Quant
• Trader
• Quant Models Used to Manage Energy Risk: Role and Limitations
• Stress Testing
• Value at Risk (VAR)
• Regression Analysis Applied to Hedging
• Single Proxy Hedges
• Multiple Proxy Hedges
• Basis Hedging in Natural Gas Markets
• Delta Hedging
• Delta-Gamma Hedging
• Delta-Gamma-Vega Hedging
• Cross-Hedging Greeks
• Cross-Market Greeks
• Spark Spreads
• Crack Spreads

Speculation ("Trading")
• Fundamentals of Trading in the Following Energy Markets
• Natural Gas
• Electricity (Power)
• Oil
• Coal
• Emissions
• Market Participants
• Technical Analysis
• Fundamental Analysis
• Trading Methodologies
• Transaction Cost Management
• System Development and Testing
• Winning Strategies to Increase Scalability and Diversify Risk

Investment Portfolio Diversification
• Tools and Techniques for Advanced Portfolio Management
• Mathematical Representation of a Portfolio
• Correlation, Dependence and Copula
• Portfolio Risks
• Time Buckets
• Measuring Portfolio Sensitivity via the Greeks
• Delta
• Vega
• Theta
• Gamma
• Rho
• Cross-Gamma
• Mark-to-market
• How to Construct a High Performing, Alpha Yielding Portfolio With Energy Products

Regulations – based on geographical regions
• Natural Gas
• Electricity (Power)
• Oil
• Coal
• Emissions

Energy Data Resources
• How to Identify and Process the Best Data Sources
• Quality of Energy Data Sources

Technology Challenges
• How to Evaluate Energy Technology Providers
• Trading Infrastructure
• Innovation
• Future Trends
• Insourcing vs. Outsourcing
• Solutions to Operational Issues

Advanced Strategies and the Next Generation of Energy Trading and Risk Products
• Energy Trading and Risk Management Products for Attracting Most Interest From Investors, Traders and Managers

Case Studies: Success and Failure
• Best Practices
• Insights and Innovation
• Ethical Issues
• Transparency Demands of Investors
• Governance Issues
• Lack of Liquidity
• Determination of Appropriate Degree of Leverage to Employ
• Developed Markets
• Emerging Global Markets
• My Personal Enron Experiences

Problem Sets with Answer Key

Rewards Program

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