Book description
Specifically written to save time and aid decision-making among busy senior executives and managers - and indeed any reader - who does not wish to be hampered by unnecessary technical detail while gaining a clear understanding of energy risk management issues.
Illustrates the purpose of energy derivatives, and evaluates their benefits and weaknesses.
More complex, quantitative material is present, but as an optional extra to your understanding - appearing only in technical appendices should you wish to deepen your appreciation of the subject and apply it to your own business.
Succinctly explains how energy derivative instruments are constructed and priced, as well how their risk can be understood and managed.
The report equips you with:
- The ability to identify risks and their interactions.
- Techniques to express these risks clearly.
- An appreciation of trading activity and its role in risk management.
- A thorough understanding of energy risk management (derivative) instruments and their relationship with physical supply and off take agreements.
- Insight into how risk management solutions can be constructed to offer protection against market price movements.
- The ability to identify flexibilities in physical operations and recognise their value.
Key to Risk Books’ new series of executive reports - this title is concise, highly accessible and practical - offering easily digested chunks of information. And to further aid your understanding it makes extensive use of bullet lists, diagrams, chapter summaries, learning aids and many market relevant case studies that marry the concepts of energy derivatives with recognisable events.
About Executive Reports**
Featuring up-to-the-minute research and essential market intelligence the new Executive Reports series from Risk Books helps you profit in a variety of industry specific sectors. Hard facts combine with practical guidance and incisive analysis to offer a highly-accessible practitioner-focused format that saves you time and aids decision-making.
Book details
- ISBN
- Book 9781904339748xy / EBook 9781908823090
- Publish date
- 1 Dec 2005
- Format
- Paperback
- Size
- A4
Author biography
Steve Leppard
Steve Leppard is a commodity structurer for corporate and liability clients in JP Morgan’s commodity team in London, a post he took up in June 2008. Prior to this Steve held posts in commodity structuring at Merrill Lynch in London, head of BP’s global oil structured derivatives group in London, SG’s senior strategist for their Gaselys JV with Gaz de France in Paris and head of Enron Europe’s quantitative research group in London. Dr Leppard holds a PhD in Mathematics from King’s College London and a first class honours degree in Mathematics from Imperial College London.
Table of contents
INTRODUCTION
Energy risk management
The risk management process
Style of presentation in the report
Chapter review and look ahead
RISK IN ENERGY MARKETS
Financial and commodity markets
Understanding risk
Designing a risk management programme
Chapter review and look ahead
MARKET VALUE OF PHYSICAL AND FINANCIAL COMMITMENTS
Preamble
Commitments, positions and market prices
Position
Market prices
Contracts and mark-to-market quantities
Mark-to-market is valid only for an instant
Chapter review and look ahead
Technical appendix: Interest rates and compounding conventions
PHYSICAL TRANSACTIONS AND BASIC HEDGING INSTRUMENTS
Physical transactions
Preamble
Physical producer
Physical consumer
Physical transformer
Risk analysis
Physical futures and forwards
Futures contracts
Forward contracts
Fixed-for-floating swaps
Other types of swap
Floating-for-floating swaps
Quanto swaps
Indexation swaps
Other swap types
Chapter review and look ahead
Technical appendix: Futures margining
Technical appendix: Pricing of OTC linear instruments
FUNDAMENTAL OPTION CONCEPTS
The language and nature of options
Why and how are options used by hedgers?
“Moneyness” and option values
Factors impacting option value
More on volatility
Moving beyond European options
Asian options
Integrated physical and risk management contracts
American options
Swaptions
The cost of hedging with options
Chapter review and look ahead
Technical appendix: Black–Scholes option valuation
DERIVATIVES PACKAGES
Combining derivatives into a package
Relationship between put and call option values
Collars and premium reduction
Three-way options
Buy-downs and participations
Structures with volume and term flexibility
Integrated physical and financial structures
Chapter review and look ahead
FURTHER TOPICS IN DERIVATIVES STRUCTURING
Exotic options and tailored structures
Spread and basket options
Digital options
Quanto options
Other option and structure types
Real options
Risk-analysis example: Hedge-based financing
Currency-market risk questions
Commodity market questions
Interest-rate-risk questions
Technical/force majeure risk questions
Proxy-risk questions
Volumetric-risk questions
Chapter review and look ahead
Technical appendix: Getting the most out of your quants
Technical appendix: Option value needn’t increase with
Increasing volatility
Technical appendix: Diagrammatic notation
WIDER RISK MANAGEMENT QUESTIONS
Market risk
Market risk concepts
Market VaR techniques
Controlling market risk exposures
Beyond market risk: Physical risk management
The risk matrix approach to transaction analysis
Introductory notes
The galaxy of risks
The risk management process
Philosophy of the risk matrix approach
What is the process?
Mapping responsibilities and following the approach
Discussion of some of the risks
Accounting risk
Market risks
Credit risks
Force majeure
Curve construction and data risks
Reputational risk
Rolling out the approach in your company
CONCLUSION
References
Preamble
General and finance
Energy derivatives
Real options
Risk management
Quantitative derivative finance
Customer Reviews
