Systematic Trading in Energy Markets

Systematic Trading in Energy Markets

An Introduction to Models for the Energy Markets

The special physical characteristics of commodities such as electricity, natural gas and oil mean that standard pricing models applied in financial markets for risk management and valuation purposes cannot simply be transferred and used as energy pricing models.

An Introduction to Models for the Energy Markets provides a clear exposition of the thinking behind the range of models used today in energy finance.

£85.00
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ISBN
9781906348229
 

Transportation, storage, seasonality and settlement issues hardly figure in financial markets and their modelling. Yet, they are crucial to the working of energy markets and, as a result, traditional financial models must be customised to give useful results.

More broadly, traders and portfolio managers, who make crucial decisions based on the output of these models, should be familiar with their power and their limitations.

Ronald Huisman has combined both academic and practical approaches in An Introduction to Models for the Energy Markets to provide the reader with a clear exposition of the thinking behind the range of models used today in energy finance - from the most basic to the cutting edge. In each chapter, a series of case-study examples offers the reader practical examples of the models’ application as well as insights into extension and development.

An Introduction to Models for the Energy Markets is an essential purchase for all risk and portfolio managers, analysts and researchers for energy companies, banks and energy investment companies. It will also be required reading for students and academic researchers in the energy area.

More Information
ISBN 9781906348229
Navision code OMIEM
Publication date 3 Aug 2009
Size 155mm x 235mm
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Ronald Huisman

Ronald Huisman is Associate Professor of Financial Economics and Energy. He is also a director of FinEdge International Group. The FinEdge International Group consists of research-oriented companies working on innovative solutions with respect to financial strategies and trading and investment management in international financial markets. He has published many papers on this subject and has also contributed to various edited books on energy economics.

List of Figures

List of Tables

About the Author

Preface

Acknowledgements

1 Data Analysis

Summary statistics: average and standard deviation

The histogram

Summary statistics: skewness and kurtosis

Distribution functions

Why do we need models if we have distributions?

2 Models

What to model: actual prices or log prices?

Models

Parameter estimation

Concluding remarks

3 Standard Models for Prices and Volatility

Characteristics of energy prices

Mean-reversion models for energy prices

Measuring volatility

Concluding remarks

4 Beyond Mean Reversion

Modelling price spikes

Concluding remarks

5 Factor Models for Forward Prices

The information embedded in forward prices

Factor models

The Kalman filter

Estimating the parameters in a long-term–short-term model

Any other factors?

Concluding remarks

6 Extreme Value Theory

Estimation procedure for the tail index

Risk management

Concluding remarks

 

7 Methods for Valuing Real Options

Real options in energy contracts and real assets

Black–Scholes related formulas

A power plant as an option

Option valuation with trees

Incorporating operational constraints

Least Squares Monte Carlo

Concluding remarks

References

Index