Book description
- Analysis of five core hedging strategies
- Quantitative assessments of each strategy’s cost and benefits
- Price correlations and liquidity effects on Nymex vs IPE
Book details
- ISBN
- 9781899332311
- Publish date
- 2 Nov 1998
- Format
- Report
- Size
- A4
Author biography
Energy Security Analysis, Inc.
Table of contents
CONTENTS
Preface
Introduction
Hedging instruments
Purposes of hedging crude oil
Volatility reduction
Hedge gain maximization and other extensions of risk management
Speculation versus hedging
Hedgemasters
Portfolios
Five hedging strategies
Pure futures strategies
Always selling 12 months forward
Selectively selling three months forward
Selling forward in backwardized markets
Pure options strategies
Using plain puts to obtain $15 insurance
Using plain puts to lock $19 budget price
Selling options
Options combination strategies
The bear spread
The straddle
The strangle
Collars
Hedging by condition: backwardized and contango markets
Hedging in bear markets
In-, out-of-, and near-the-money options
Layer upon layer
Exotic (Asian) options strategies
Insurance instruments
Three forces for pushing for insurance company involvement
Sample insurance instruments
Blending risks with insurance programs
Conclusions: insurance versus derivatives
West Texas Intermediate (WTI) market depth, liquidity, and hedging effectiveness
Market liquidity
Concepts
Measurement
Market depth
Results
Conclusions
WTI and Brent: who leads and who lags?
Results
Conclusions
Corellations and hedging effectiveness
Risk management example
A crude hedging portfolio
Conclusions
Winners and losers
Energy consumers
The last word: does basis risk render all of this moot?
Notes
Bibliography
Appendix: tables and charts summarizing the outcomes of futures and options strategies under different market conditions and expectations
Testimonials
“I would recommend this report to those considering entering or evaluating a crude oil hedging programme.“
H. Brett Humphreys, Bankers Trust
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