Energy Risk: Valuing and Managing Energy Derivatives
The electricity, natural gas, and other energy markets are on the brink of becoming THE hot opportunity for institutional investors worldwide. In fact, the growth in volume for NYMEX and IPE energy contracts is the only proof you need of the enormous potential in trading these markets. Now, for the first time, this book gives you step-by-step directions on taking advantage of this developing resource. Energy Risk walks you through properly assessing and evaluating the enormous opportunities that are unique to this complex yet vibrant market. It provides not only an expert overview of energy trading but also the philosophies and specific investment strategies you need. Harvard-trained physicist Dragana Pilipovic reveals the intricacies and mechanics of today's energy markets, provides practical answers on how best to get a foothold in energy trading, and also discusses: In-depth explanations of the primary factors that influence energy risk, such as spot price behavior, volatility, and the forward price curve; A detailed introduction to the fundamental price drivers of energy markets including electricity, natural gas, and heating and crude oil; Clearly defined ways that you can use tools introduced throughout the book to achieve your company's crucial risk/return goals. Containing unique trading models that were custom-designed for managing risk in energy and commodity trading, and with over 175 charts and graphs that illustrate key features of the market's equations, correlations, and methodologies. Energy Risk will be the standard energy market reference for many years to come.
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actual assumption average benchmarks Black-Scholes calculate caplet volatility capture chapter closed-form solutions contango contract convenience yield correlations daily price defined delivery derivative differential equation discrete volatilities distribution analysis Edgeworth series energy commodity energy markets equilibrium price expected spot price expected value FIGURE forward contract forward price curve forward price model function future hedging Hence implementation Ito's Lemma kurtosis lognormal model long-term market price market variable marketplace methodology model parameters natural gas normally distributed NYMEX On-Peak option expiration option pricing model option underlying option valuation parity value portfolio analysis portfolio value price distribution price mean-reverting model price returns Q-Q plot random variable residuals reversion risk management risk-free rate seasonality factors series analysis short-term simulations single-factor spot price behavior spot price model spot price volatility standard deviation stochastic term strike price tion two-factor underlying price valuation and risk variance volatility matrix volatility smile volatility term structure zero