Energy Risk Management

A Non-Technical Introduction to Energy Derivatives

Publication Date	December 2005
Publisher	Risk Books
Product Type	Book
Pages	222
ISBN Number	1904339743
Product Code	RIS00341

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Summary

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.

Content

Introduction
- Energy risk management
- The risk management process
- Style of presentation in the book
- 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
- Contracts and mark-to-market quantities
- Mark-to-market is valid only for an instant
- Chapter review and look ahead
Physical Transactions and Basic Hedging Instruments
- Physical transactions:
- Preamble
- Physical producer
- Physical consumer
- Physical transformer
- Risk analysis
- Physical futures and forwards
  - Fixed-for-floating swaps
  - Other types of swap:
  - Floating-for-floating swaps
  - Quanto swaps
  - Indexation swap
  - Other swap types
- Chapter review and look ahead
- Technical appendix: Futures margining
- Technical appendix: Pricing of OTC linear instruments
Basic Option Concepts
- Break-out boxes
- Technical appendices
- Black-Scholes option valuation
- Computing historical volatility and correlation
- Types of volatility
- Comparison of option values for European, American and Asian options
Derivatives Packages
- Break-out boxes
Tailored Derivative Types and Structuring
- Hedge-based financing
- Technical appendix: Getting the most out of your quants
- Break-out boxes
- REAL OPTIONS
- What are real options?
- Break-out boxes
- Technical appendix: Diagrammatic notation
Value at Risk and Other Risk Measurement Techniques
- Break-out boxes
Appendix: Units of Measurement