{"product_id":"handbook-of-multicommodity-markets-and-products-9780470745243","title":"Handbook of MultiCommodity Markets and Products","description":"\u003cb\u003eBook Synopsis\u003c\/b\u003e\u003cbr\u003eThe comprehensive guide to working more effectively within the multi-commodity market.     The Handbook of Multi-Commodity Markets and Products is the definitive desktop reference for traders, structurers, and risk managers who wish to broaden their knowledge base.\u003cbr\u003e\u003cbr\u003e\u003cb\u003eTable of Contents\u003c\/b\u003e\u003cbr\u003e\u003cp\u003ePreface xix\u003c\/p\u003e \u003cp\u003eAcknowledgements xxiii\u003c\/p\u003e \u003cp\u003eAbout the Editors xxv\u003c\/p\u003e \u003cp\u003eList of Contributors xxvii\u003c\/p\u003e \u003cp\u003e\u003cb\u003ePart One Commodity Markets and Products\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 1 Oil Markets and Products\u003c\/b\u003e \u003cb\u003e3\u003c\/b\u003e\u003cbr\u003e \u003ci\u003eCristiano Campi and Francesco Galdenzi\u003c\/i\u003e\u003c\/p\u003e \u003cp\u003e1.1 Introduction 3\u003c\/p\u003e \u003cp\u003e1.2 Risk Management for Corporations: Hedging Using Derivative Instruments 4\u003c\/p\u003e \u003cp\u003e1.2.1 Crude Oil and Oil Products Risk Management for Corporations 4\u003c\/p\u003e \u003cp\u003e1.2.2 Aviation: Risk Profile and Hedging Strategies 11\u003c\/p\u003e \u003cp\u003e1.2.3 Shipping: Risk Profile and Hedging Strategies 20\u003c\/p\u003e \u003cp\u003e1.2.4 Land Transportation: Risk Profile and Hedging Strategies 27\u003c\/p\u003e \u003cp\u003e1.2.5 Utilities: Risk Profile and Hedging Strategies 32\u003c\/p\u003e \u003cp\u003e1.2.6 Refineries: Risk Profile and Hedging Strategies 35\u003c\/p\u003e \u003cp\u003e1.2.7 Industrial Consumers: Risk Profile and Hedging Strategies 40\u003c\/p\u003e \u003cp\u003e1.3 Oil Physical Market Hedging and Trading 41\u003c\/p\u003e \u003cp\u003e1.3.1 The Actors, Futures and OTC Prices 41\u003c\/p\u003e \u003cp\u003e1.3.2 The Most Commonly Used Financial Instruments 45\u003c\/p\u003e \u003cp\u003e1.3.3 How to Monitor and Manage Risk 49\u003c\/p\u003e \u003cp\u003e1.3.4 How to Create a Market View 52\u003c\/p\u003e \u003cp\u003e1.3.5 Trading Strategies to Maximize a Market View 54\u003c\/p\u003e \u003cp\u003eFurther Reading 66\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 2 Coal Markets and Products\u003c\/b\u003e \u003cb\u003e67\u003c\/b\u003e\u003cbr\u003e \u003ci\u003eLars Schernikau\u003c\/i\u003e\u003c\/p\u003e \u003cp\u003e2.1 Introduction 67\u003c\/p\u003e \u003cp\u003e2.2 Source of Coal – Synopsis of the Resource Coal 72\u003c\/p\u003e \u003cp\u003e2.2.1 The Fundamentals of Energy Sources and Fossil Fuels 72\u003c\/p\u003e \u003cp\u003e2.2.2 Process of Coal Formation 74\u003c\/p\u003e \u003cp\u003e2.2.3 Coal Classification 74\u003c\/p\u003e \u003cp\u003e2.2.4 Reserves and Resources 79\u003c\/p\u003e \u003cp\u003e2.2.5 Coal Mining and Production 83\u003c\/p\u003e \u003cp\u003e2.3 Use of Coal – Power Generation and More 90\u003c\/p\u003e \u003cp\u003e2.3.1 Steam Coal and its Role in Power Generation 91\u003c\/p\u003e \u003cp\u003e2.3.2 Coal-Fired Power Plant Technologies 93\u003c\/p\u003e \u003cp\u003e2.3.3 Cement and Other Industry 95\u003c\/p\u003e \u003cp\u003e2.3.4 Alternatives to Coal: Shale Gas and Other 95\u003c\/p\u003e \u003cp\u003e2.3.5 Future Trend: CtL and Coal Bed Methane 101\u003c\/p\u003e \u003cp\u003e2.4 Overview of Worldwide Steam Coal Supply and Demand 102\u003c\/p\u003e \u003cp\u003e2.4.1 Atlantic Demand Market: Europe at its Core 102\u003c\/p\u003e \u003cp\u003e2.4.2 Pacific Demand Market: China, India, Japan, Taiwan, Korea and SEA 104\u003c\/p\u003e \u003cp\u003e2.4.3 Steam Coal Supply Regions: ID, AU, USA, SA, RU, CO and Others 107\u003c\/p\u003e \u003cp\u003e2.4.4 Seaborne Freight 116\u003c\/p\u003e \u003cp\u003e2.4.5 Geopolitical and Policy Environment 118\u003c\/p\u003e \u003cp\u003e2.5 The Global Steam Coal Trade Market and its Future 121\u003c\/p\u003e \u003cp\u003e2.5.1 Current and Future Market Dynamics of the Coal Trade 121\u003c\/p\u003e \u003cp\u003e2.5.2 Future Steam Coal Price Trends 125\u003c\/p\u003e \u003cp\u003e2.5.3 Future Source of Energy: What Role Will Coal Play? 127\u003c\/p\u003e \u003cp\u003e2.6 Concluding Words 129\u003c\/p\u003e \u003cp\u003eAbbreviations and Definitions 130\u003c\/p\u003e \u003cp\u003eAcknowledgements 132\u003c\/p\u003e \u003cp\u003eReferences 132\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 3 Natural Gas Markets and Products\u003c\/b\u003e \u003cb\u003e135\u003c\/b\u003e\u003cbr\u003e \u003ci\u003eMark Cummins and Bernard Murphy\u003c\/i\u003e\u003c\/p\u003e \u003cp\u003e3.1 Physical Natural Gas Markets 135\u003c\/p\u003e \u003cp\u003e3.1.1 Physical Structure 141\u003c\/p\u003e \u003cp\u003e3.1.2 Natural Gas Market Hubs and Main Participants 146\u003c\/p\u003e \u003cp\u003e3.1.3 Liquefied Natural Gas 147\u003c\/p\u003e \u003cp\u003e3.1.4 Shale Gas 149\u003c\/p\u003e \u003cp\u003e3.2 Natural Gas Contracting and Pricing 154\u003c\/p\u003e \u003cp\u003e3.2.1 Natural Gas Price Formation 155\u003c\/p\u003e \u003cp\u003e3.3 Financial Natural Gas Markets 158\u003c\/p\u003e \u003cp\u003e3.3.1 Exchange-Based Markets 158\u003c\/p\u003e \u003cp\u003e3.3.2 Natural Gas Futures 159\u003c\/p\u003e \u003cp\u003e3.3.3 Natural Gas Options 172\u003c\/p\u003e \u003cp\u003e3.3.4 OTC Markets and Products 179\u003c\/p\u003e \u003cp\u003eReferences 180\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 4 Electricity Markets and Products\u003c\/b\u003e \u003cb\u003e181\u003c\/b\u003e\u003cbr\u003e \u003ci\u003eStefano Fiorenzani, Bernard Murphy and Mark Cummins\u003c\/i\u003e\u003c\/p\u003e \u003cp\u003e4.1 Market Structure and Price Components 181\u003c\/p\u003e \u003cp\u003e4.1.1 Spot and Forward Markets 181\u003c\/p\u003e \u003cp\u003e4.1.2 Supply and Demand Interaction 183\u003c\/p\u003e \u003cp\u003e4.1.3 Electricity Derivatives 186\u003c\/p\u003e \u003cp\u003e4.1.4 Power Price Models 189\u003c\/p\u003e \u003cp\u003e4.1.5 Spot Price Analysis (IPEX Case) 196\u003c\/p\u003e \u003cp\u003e4.1.6 Forward Price Analysis (EEX Case) 200\u003c\/p\u003e \u003cp\u003e4.2 Renewables, Intra-Day Trading and Capacity Markets 205\u003c\/p\u003e \u003cp\u003e4.2.1 Renewables Expansion Targets 205\u003c\/p\u003e \u003cp\u003e4.2.2 Growth in Intra-Day Trading 206\u003c\/p\u003e \u003cp\u003e4.2.3 Implications for Future Price Volatility and Price Profiles 207\u003c\/p\u003e \u003cp\u003e4.2.4 Reforms and Innovations in Capacity Markets 209\u003c\/p\u003e \u003cp\u003e4.2.5 Provision and Remuneration of Flexibility – Storage Assets 212\u003c\/p\u003e \u003cp\u003e4.3 Risk Measures for Power Portfolios 216\u003c\/p\u003e \u003cp\u003e4.3.1 Value-Based Risk Measures 216\u003c\/p\u003e \u003cp\u003e4.3.2 Flow-Based Risk Measures 218\u003c\/p\u003e \u003cp\u003e4.3.3 Credit Risk for Power Portfolios 220\u003c\/p\u003e \u003cp\u003eReferences 221\u003c\/p\u003e \u003cp\u003eFurther Reading 221\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 5 Emissions Markets and Products\u003c\/b\u003e \u003cb\u003e223\u003c\/b\u003e\u003cbr\u003e \u003ci\u003eMarc Chesney, Luca Taschini and Jonathan Gheyssens\u003c\/i\u003e\u003c\/p\u003e \u003cp\u003e5.1 Introduction 223\u003c\/p\u003e \u003cp\u003e5.2 Climate Change and the Economics of Externalities 224\u003c\/p\u003e \u003cp\u003e5.2.1 The Climate Change Issue 224\u003c\/p\u003e \u003cp\u003e5.2.2 The Economics of Externality and GHG Pollution 226\u003c\/p\u003e \u003cp\u003e5.3 The Kyoto Protocol 227\u003c\/p\u003e \u003cp\u003e5.3.1 The United Nations Framework Convention on Climate Change 227\u003c\/p\u003e \u003cp\u003e5.3.2 The Conference of Parties and the Subsidiary Bodies 229\u003c\/p\u003e \u003cp\u003e5.3.3 The Kyoto Protocol 229\u003c\/p\u003e \u003cp\u003e5.3.4 The Road to Paris 231\u003c\/p\u003e \u003cp\u003e5.4 The EU ETS 232\u003c\/p\u003e \u003cp\u003e5.4.1 Institutional Features 232\u003c\/p\u003e \u003cp\u003e5.4.2 Allocation Criteria 234\u003c\/p\u003e \u003cp\u003e5.4.3 Market Players and the Permit Markets 236\u003c\/p\u003e \u003cp\u003e5.4.4 The Future of the EU ETS 238\u003c\/p\u003e \u003cp\u003e5.5 Regional Markets: A Fragmented Landscape 239\u003c\/p\u003e \u003cp\u003e5.5.1 Regional Markets 239\u003c\/p\u003e \u003cp\u003e5.5.2 Voluntary Markets 240\u003c\/p\u003e \u003cp\u003e5.6 A New Asset Class: CO\u003csub\u003e2\u003c\/sub\u003e Emission Permits 241\u003c\/p\u003e \u003cp\u003e5.6.1 Macroeconomic Models 242\u003c\/p\u003e \u003cp\u003e5.6.2 Econometric Investigation of CO\u003csub\u003e2\u003c\/sub\u003e Permit Price Time-Series 243\u003c\/p\u003e \u003cp\u003e5.6.3 Stochastic Equilibrium Models 251\u003c\/p\u003e \u003cp\u003eAbbreviations 252\u003c\/p\u003e \u003cp\u003eReferences 252\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 6 Weather Risk and Weather Derivatives 255\u003c\/b\u003e\u003cbr\u003e \u003ci\u003eAlessandro Mauro\u003c\/i\u003e\u003c\/p\u003e \u003cp\u003e6.1 Introduction 255\u003c\/p\u003e \u003cp\u003e6.2 Identification of Volumetric Risk 257\u003c\/p\u003e \u003cp\u003e6.2.1 Weather Events on the Demand Curve 258\u003c\/p\u003e \u003cp\u003e6.2.2 Weather Events on the Supply Curve 260\u003c\/p\u003e \u003cp\u003e6.2.3 Risk Measurement and Weather-at-Risk 262\u003c\/p\u003e \u003cp\u003e6.3 Atmospheric Temperature and Natural Gas Market 264\u003c\/p\u003e \u003cp\u003e6.3.1 Characterization of the Air Temperature Meteorological Variable 264\u003c\/p\u003e \u003cp\u003e6.3.2 Degree Days 267\u003c\/p\u003e \u003cp\u003e6.3.3 Volumetric Risk in the Natural Gas Market 270\u003c\/p\u003e \u003cp\u003e6.4 Modification of Weather Risk Exposure with Weather Derivatives 272\u003c\/p\u003e \u003cp\u003e6.4.1 Weather Derivatives for Temperature-Related Risk 273\u003c\/p\u003e \u003cp\u003e6.5 Conclusions 276\u003c\/p\u003e \u003cp\u003eNomenclature 277\u003c\/p\u003e \u003cp\u003eReferences 277\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 7 Industrial Metals Markets and Products\u003c\/b\u003e \u003cb\u003e279\u003c\/b\u003e\u003cbr\u003e \u003ci\u003eAlessandro Porru\u003c\/i\u003e\u003c\/p\u003e \u003cp\u003e7.1 General Overview 279\u003c\/p\u003e \u003cp\u003e7.1.1 Brief History of the LME 280\u003c\/p\u003e \u003cp\u003e7.1.2 Non-ferrous Metals 282\u003c\/p\u003e \u003cp\u003e7.1.3 Other Metals 291\u003c\/p\u003e \u003cp\u003e7.1.4 LME Instruments 292\u003c\/p\u003e \u003cp\u003e7.1.5 OTC Instruments 298\u003c\/p\u003e \u003cp\u003e7.1.6 A New Player: The Investor 301\u003c\/p\u003e \u003cp\u003e7.2 Forward Curves 305\u003c\/p\u003e \u003cp\u003e7.2.1 Building LME’s Curves in Practice 308\u003c\/p\u003e \u003cp\u003e7.2.2 Interpolation 313\u003c\/p\u003e \u003cp\u003e7.2.3 LME, COMEX and SHFE Copper Curve and Arbitrage 314\u003c\/p\u003e \u003cp\u003e7.2.4 Contango Limit… 318\u003c\/p\u003e \u003cp\u003e7.2.5 …and No-Limit Backwardation 324\u003c\/p\u003e \u003cp\u003e7.2.6 Hedging the Curve in Practice 328\u003c\/p\u003e \u003cp\u003e7.3 Volatility 337\u003c\/p\u003e \u003cp\u003e7.3.1 A European Disguised as an American 338\u003c\/p\u003e \u003cp\u003e7.3.2 LME’s Closing Volatilities 339\u003c\/p\u003e \u003cp\u003e7.3.3 Sticky Strike, Sticky Delta and Skew 342\u003c\/p\u003e \u003cp\u003e7.3.4 Building the Surface in Practice 345\u003c\/p\u003e \u003cp\u003e7.3.5 Considerations on Vega Hedging 348\u003c\/p\u003e \u003cp\u003eAcknowledgements 352\u003c\/p\u003e \u003cp\u003eReferences 353\u003c\/p\u003e \u003cp\u003eFurther Reading 353\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 8 Freight Markets and Products\u003c\/b\u003e \u003cb\u003e355\u003c\/b\u003e\u003cbr\u003e \u003ci\u003eManolis G. Kavussanos, Ilias D. Visvikis and Dimitris N. Dimitrakopoulos\u003c\/i\u003e\u003c\/p\u003e \u003cp\u003e8.1 Introduction 355\u003c\/p\u003e \u003cp\u003e8.2 Business Risks in Shipping 356\u003c\/p\u003e \u003cp\u003e8.2.1 The Sources of Risk in the Shipping Industry 356\u003c\/p\u003e \u003cp\u003e8.2.2 Market Segmentation in the Shipping Industry 358\u003c\/p\u003e \u003cp\u003e8.2.3 Empirical Regularities in Freight Rate Markets 359\u003c\/p\u003e \u003cp\u003e8.2.4 Traditional Risk Management Strategies 365\u003c\/p\u003e \u003cp\u003e8.3 Freight Rate Derivatives 366\u003c\/p\u003e \u003cp\u003e8.3.1 Risk Management in Shipping 366\u003c\/p\u003e \u003cp\u003e8.3.2 The Underlying Indices of Freight Rate Derivatives 366\u003c\/p\u003e \u003cp\u003e8.3.3 The Freight Derivatives Market 372\u003c\/p\u003e \u003cp\u003e8.3.4 Examples of Freight Derivatives Trading 380\u003c\/p\u003e \u003cp\u003e8.4 Pricing, Hedging and Freight Rate Risk Measurement 382\u003c\/p\u003e \u003cp\u003e8.4.1 Pricing and Hedging Effectiveness of Freight Derivatives 382\u003c\/p\u003e \u003cp\u003e8.4.2 Value-at-Risk (VaR) in Freight Markets 384\u003c\/p\u003e \u003cp\u003e8.4.3 Expected Shortfall (ES) in Freight Markets 389\u003c\/p\u003e \u003cp\u003e8.4.4 Empirical Evidence on Freight Derivatives 390\u003c\/p\u003e \u003cp\u003e8.5 Other Derivatives for the Shipping Industry 393\u003c\/p\u003e \u003cp\u003e8.5.1 Bunker Fuel Derivatives 393\u003c\/p\u003e \u003cp\u003e8.5.2 Vessel Value Derivatives 395\u003c\/p\u003e \u003cp\u003e8.5.3 Foreign Exchange Rate Derivatives Contracts 395\u003c\/p\u003e \u003cp\u003e8.5.4 Interest Rate Derivatives Contracts 396\u003c\/p\u003e \u003cp\u003e8.6 Conclusion 396\u003c\/p\u003e \u003cp\u003eAcknowledgements 396\u003c\/p\u003e \u003cp\u003eReferences 397\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 9 Agricultural and Soft Markets\u003c\/b\u003e \u003cb\u003e399\u003c\/b\u003e\u003cbr\u003e \u003ci\u003eFrancis Declerk\u003c\/i\u003e\u003c\/p\u003e \u003cp\u003e9.1 Introduction: Stakes and Objectives 399\u003c\/p\u003e \u003cp\u003e9.1.1 Stakes 399\u003c\/p\u003e \u003cp\u003e9.1.2 Objectives 399\u003c\/p\u003e \u003cp\u003e9.2 Agricultural Commodity Specificity and Futures Markets 400\u003c\/p\u003e \u003cp\u003e9.2.1 Agricultural Commodity Specificity 400\u003c\/p\u003e \u003cp\u003e9.2.2 Volatility of Agricultural Markets 402\u003c\/p\u003e \u003cp\u003e9.2.3 Forward Contract and Futures Contract 402\u003c\/p\u003e \u003cp\u003e9.2.4 Major Agricultural Futures Markets and Contracts 404\u003c\/p\u003e \u003cp\u003e9.2.5 Roles of Futures Markets 405\u003c\/p\u003e \u003cp\u003e9.2.6 Institutions Related to Futures Markets 406\u003c\/p\u003e \u003cp\u003e9.2.7 Commodity Futures Contracts 406\u003c\/p\u003e \u003cp\u003e9.2.8 The Operators 408\u003c\/p\u003e \u003cp\u003e9.2.9 Monitoring Hedging: Settlement 409\u003c\/p\u003e \u003cp\u003e9.2.10 Accounting and Tax Rules 409\u003c\/p\u003e \u003cp\u003e9.3 Demand and Supply, Price Determinants and Dynamics 409\u003c\/p\u003e \u003cp\u003e9.3.1 Supply and Demand for Agricultural Commodities: The Determinants 409\u003c\/p\u003e \u003cp\u003e9.3.2 Agricultural Market Prices, Failures and Policies 413\u003c\/p\u003e \u003cp\u003e9.3.3 The Price Dynamics of Seasonal and Storable Agricultural Commodities 416\u003c\/p\u003e \u003cp\u003e9.3.4 The Features of Major Agricultural and Soft Markets 417\u003c\/p\u003e \u003cp\u003e9.4 Hedging and Basis Management 466\u003c\/p\u003e \u003cp\u003e9.4.1 Short Hedging for Producers 466\u003c\/p\u003e \u003cp\u003e9.4.2 Long Hedging for Processors 469\u003c\/p\u003e \u003cp\u003e9.4.3 Management of Basis Risk 471\u003c\/p\u003e \u003cp\u003e9.5 The Financialization of Agricultural Markets and Hunger: Speculation and Regulation 480\u003c\/p\u003e \u003cp\u003e9.5.1 Factors Affecting the Volatility of Agricultural Commodity Prices 480\u003c\/p\u003e \u003cp\u003e9.5.2 Financialization: Impact of Non-commercial Traders on Market Price 483\u003c\/p\u003e \u003cp\u003e9.5.3 The Financialization of Grain Markets and Speculation 484\u003c\/p\u003e \u003cp\u003e9.5.4 Bubble or Not, Agricultural Commodities have Become an Asset Class 489\u003c\/p\u003e \u003cp\u003e9.5.5 Price Volatility and Regulation 490\u003c\/p\u003e \u003cp\u003e9.5.6 Ongoing Research about Speculation and Regulation 493\u003c\/p\u003e \u003cp\u003e9.6 Conclusion about Hedging and Futures Contracts 493\u003c\/p\u003e \u003cp\u003e9.6.1 Hedging Process 493\u003c\/p\u003e \u003cp\u003e9.6.2 Key Success Factors for Agricultural Commodity Futures Contracts 494\u003c\/p\u003e \u003cp\u003e9.6.3 Conclusion and Prospects 495\u003c\/p\u003e \u003cp\u003eReferences 495\u003c\/p\u003e \u003cp\u003eFurther Reading 496\u003c\/p\u003e \u003cp\u003eGlossary, Quotations and Policy on Websites 497\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 10 Foreign Exchange Markets and Products\u003c\/b\u003e \u003cb\u003e499\u003c\/b\u003e\u003cbr\u003e \u003ci\u003eAntonio Castagna\u003c\/i\u003e\u003c\/p\u003e \u003cp\u003e10.1 The FX Market 499\u003c\/p\u003e \u003cp\u003e10.1.1 FX Rates and Spot Contracts 499\u003c\/p\u003e \u003cp\u003e10.1.2 Outright and FX Swap Contracts 500\u003c\/p\u003e \u003cp\u003e10.1.3 FX Option Contracts 504\u003c\/p\u003e \u003cp\u003e10.1.4 Main Traded FX Options Structures 507\u003c\/p\u003e \u003cp\u003e10.2 Pricing Models for FX Options 509\u003c\/p\u003e \u003cp\u003e10.2.1 The Black–Scholes Model 510\u003c\/p\u003e \u003cp\u003e10.3 The Volatility Surface 511\u003c\/p\u003e \u003cp\u003e10.4 Barrier Options 512\u003c\/p\u003e \u003cp\u003e10.4.1 A Taxonomy of Barrier Options 512\u003c\/p\u003e \u003cp\u003e10.5 Sources of FX Risk Exposure 513\u003c\/p\u003e \u003cp\u003e10.6 Hedging FX Exposures Embedded in Energy and Commodity Contracts 517\u003c\/p\u003e \u003cp\u003e10.6.1 FX Forward Exposures and Conversions 518\u003c\/p\u003e \u003cp\u003e10.6.2 FX-Linked Energy Contracts 522\u003c\/p\u003e \u003cp\u003e10.7 Typical Hedging Structures for FX Risk Exposure 533\u003c\/p\u003e \u003cp\u003e10.7.1 Collar Plain Vanilla 533\u003c\/p\u003e \u003cp\u003e10.7.2 Leveraged Forward 536\u003c\/p\u003e \u003cp\u003e10.7.3 Participating Forward 538\u003c\/p\u003e \u003cp\u003e10.7.4 Knock-Out Forward 540\u003c\/p\u003e \u003cp\u003e10.7.5 Knock-In Forward 543\u003c\/p\u003e \u003cp\u003e10.7.6 Knock-In Knock-out Forward 545\u003c\/p\u003e \u003cp\u003e10.7.7 Resettable Forward 548\u003c\/p\u003e \u003cp\u003e10.7.8 Range Resettable Forward 550\u003c\/p\u003e \u003cp\u003eReferences 553\u003c\/p\u003e \u003cp\u003e\u003cb\u003ePart Two Quantitative Topics\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 11 An Introduction to Stochastic Calculus with Matlab\u003csup\u003e®\u003c\/sup\u003e Examples 557\u003c\/b\u003e\u003cbr\u003e \u003ci\u003eLaura Ballotta and Gianluca Fusai\u003c\/i\u003e\u003c\/p\u003e \u003cp\u003e11.1 Brownian Motion 558\u003c\/p\u003e \u003cp\u003e11.1.1 Defining Brownian Motion 558\u003c\/p\u003e \u003cp\u003e11.2 The Stochastic Integral and Stochastic Differential Equations 566\u003c\/p\u003e \u003cp\u003e11.2.1 Introduction 566\u003c\/p\u003e \u003cp\u003e11.2.2 Defining the Stochastic Integral 567\u003c\/p\u003e \u003cp\u003e11.2.3 The It Stochastic Integral as a Mean Square Limit of Suitable Riemann–Stieltjes Sums 567\u003c\/p\u003e \u003cp\u003e11.2.4 A Motivating Example: Computing ∫\u003csub\u003e0\u003c\/sub\u003e\u003csup\u003et\u003c\/sup\u003e\u003ci\u003eW\u003c\/i\u003e(\u003ci\u003es\u003c\/i\u003e)\u003ci\u003edW\u003c\/i\u003e(\u003ci\u003es\u003c\/i\u003e) 568\u003c\/p\u003e \u003cp\u003e11.2.5 Properties of the Stochastic Integral 569\u003c\/p\u003e \u003cp\u003e11.2.6 Itˆo Process and Stochastic Differential Equations 571\u003c\/p\u003e \u003cp\u003e11.2.7 Solving Stochastic Integrals and\/or Stochastic Differential Equations 573\u003c\/p\u003e \u003cp\u003e11.3 Introducing Itȏ’s Formula 575\u003c\/p\u003e \u003cp\u003e11.3.1 A Fact from Ordinary Calculus 576\u003c\/p\u003e \u003cp\u003e11.3.2 Itˆo’s Formula when \u003ci\u003eY \u003c\/i\u003e= \u003ci\u003eg\u003c\/i\u003e(\u003ci\u003ex\u003c\/i\u003e), \u003ci\u003eg\u003c\/i\u003e(\u003ci\u003ex\u003c\/i\u003e) ∈ \u003ci\u003eC\u003c\/i\u003e\u003csup\u003e2\u003c\/sup\u003e 576\u003c\/p\u003e \u003cp\u003e11.3.3 Guiding Principle 577\u003c\/p\u003e \u003cp\u003e11.3.4 Itˆo’s Formula when \u003ci\u003eY\u003c\/i\u003e(\u003ci\u003et\u003c\/i\u003e) = \u003ci\u003eg\u003c\/i\u003e(\u003ci\u003et\u003c\/i\u003e, \u003ci\u003eX\u003c\/i\u003e), \u003ci\u003eg\u003c\/i\u003e(\u003ci\u003et\u003c\/i\u003e, \u003ci\u003eX\u003c\/i\u003e) ∈ \u003ci\u003eC\u003c\/i\u003e\u003csup\u003e1,2 \u003c\/sup\u003e577\u003c\/p\u003e \u003cp\u003e11.3.5 The Multivariate Itˆo’s Lemma when \u003ci\u003eZ \u003c\/i\u003e= \u003ci\u003eg\u003c\/i\u003e(\u003ci\u003et\u003c\/i\u003e, \u003ci\u003eX\u003c\/i\u003e, \u003ci\u003eY\u003c\/i\u003e) 578\u003c\/p\u003e \u003cp\u003e11.4 Important SDEs 581\u003c\/p\u003e \u003cp\u003e11.4.1 The Geometric Brownian Motion \u003ci\u003eGBM\u003c\/i\u003e(\u003ci\u003e𝜇\u003c\/i\u003e, \u003ci\u003e𝜎\u003c\/i\u003e) 581\u003c\/p\u003e \u003cp\u003e11.4.2 The Vasicek Mean-Reverting Process 588\u003c\/p\u003e \u003cp\u003e11.4.3 The Cox–Ingersoll–Ross (CIR) Model 595\u003c\/p\u003e \u003cp\u003e11.4.4 The Constant Elasticity of Variance (CEV) Model 604\u003c\/p\u003e \u003cp\u003e11.4.5 The Brownian Bridge 607\u003c\/p\u003e \u003cp\u003e11.4.6 The Stochastic Volatility Heston Model (1987) 611\u003c\/p\u003e \u003cp\u003e11.5 Stochastic Processes with Jumps 618\u003c\/p\u003e \u003cp\u003e11.5.1 Preliminaries 618\u003c\/p\u003e \u003cp\u003e11.5.2 Jump Diffusion Processes 623\u003c\/p\u003e \u003cp\u003e11.5.3 Time-Changed Brownian Motion 628\u003c\/p\u003e \u003cp\u003e11.5.4 Final Remark: Lévy Processes 632\u003c\/p\u003e \u003cp\u003eReferences 633\u003c\/p\u003e \u003cp\u003eFurther Reading 633\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 12 Estimating Commodity Term Structure Volatilities 635\u003cbr\u003e \u003c\/b\u003e\u003ci\u003eAndrea Roncoroni, Rachid Id Brik and Mark Cummins\u003c\/i\u003e\u003c\/p\u003e \u003cp\u003e12.1 Introduction 635\u003c\/p\u003e \u003cp\u003e12.2 Model Estimation Using the Kalman Filter 635\u003c\/p\u003e \u003cp\u003e12.2.1 Description of the Methodology 636\u003c\/p\u003e \u003cp\u003e12.2.2 Case Study: Estimating Parameters on Crude Oil 642\u003c\/p\u003e \u003cp\u003e12.3 Principal Components Analysis 646\u003c\/p\u003e \u003cp\u003e12.3.1 PCA: Technical Presentation 647\u003c\/p\u003e \u003cp\u003e12.3.2 Case Study: Risk Analysis on Energy Markets 651\u003c\/p\u003e \u003cp\u003e12.4 Conclusion 655\u003c\/p\u003e \u003cp\u003eAppendix 655\u003c\/p\u003e \u003cp\u003eReferences 657\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 13 Nonparametric Estimation of Energy and Commodity Price Processes 659\u003cbr\u003e \u003c\/b\u003e\u003ci\u003eGianna Fig`a-Talamanca and Andrea Roncoroni\u003c\/i\u003e\u003c\/p\u003e \u003cp\u003e13.1 Introduction 659\u003c\/p\u003e \u003cp\u003e13.2 Estimation Method 660\u003c\/p\u003e \u003cp\u003e13.3 Empirical Results 663\u003c\/p\u003e \u003cp\u003eReferences 672\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 14 How to Build Electricity Forward Curves 673\u003cbr\u003e \u003c\/b\u003e\u003ci\u003eRuggero Caldana, Gianluca Fusai and Andrea Roncoroni\u003c\/i\u003e\u003c\/p\u003e \u003cp\u003e14.1 Introduction 673\u003c\/p\u003e \u003cp\u003e14.2 Review of the Literature 674\u003c\/p\u003e \u003cp\u003e14.3 Electricity Forward Contracts 675\u003c\/p\u003e \u003cp\u003e14.4 Smoothing Forward Price Curves 677\u003c\/p\u003e \u003cp\u003e14.5 An Illustrative Example: Daily Forward Curve 679\u003c\/p\u003e \u003cp\u003e14.6 Conclusion 684\u003c\/p\u003e \u003cp\u003eReferences 684\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 15 GARCH Models for Commodity Markets 687\u003cbr\u003e \u003c\/b\u003e\u003ci\u003eEduardo Rossi and Filippo Spazzini\u003c\/i\u003e\u003c\/p\u003e \u003cp\u003e15.1 Introduction 687\u003c\/p\u003e \u003cp\u003e15.2 The GARCH Model: General Definition 690\u003c\/p\u003e \u003cp\u003e15.2.1 The ARCH(\u003ci\u003eq\u003c\/i\u003e) Model 692\u003c\/p\u003e \u003cp\u003e15.2.2 The GARCH(\u003ci\u003ep\u003c\/i\u003e,\u003ci\u003eq\u003c\/i\u003e) Model 693\u003c\/p\u003e \u003cp\u003e15.2.3 The Yule–Walker Equations for the Squared Process 695\u003c\/p\u003e \u003cp\u003e15.2.4 Stationarity of the GARCH(\u003ci\u003ep\u003c\/i\u003e,\u003ci\u003eq\u003c\/i\u003e) 696\u003c\/p\u003e \u003cp\u003e15.2.5 Forecasting Volatility with GARCH 698\u003c\/p\u003e \u003cp\u003e15.3 The IGARCH(\u003ci\u003ep\u003c\/i\u003e,\u003ci\u003eq\u003c\/i\u003e) Model 699\u003c\/p\u003e \u003cp\u003e15.4 A Permanent and Transitory Component Model of Volatility 700\u003c\/p\u003e \u003cp\u003e15.5 Asymmetric Models 702\u003c\/p\u003e \u003cp\u003e15.5.1 The EGARCH(\u003ci\u003ep\u003c\/i\u003e,\u003ci\u003eq\u003c\/i\u003e) Model 702\u003c\/p\u003e \u003cp\u003e15.5.2 Other Asymmetric Models 704\u003c\/p\u003e \u003cp\u003e15.5.3 The News Impact Curve 706\u003c\/p\u003e \u003cp\u003e15.6 Periodic GARCH 707\u003c\/p\u003e \u003cp\u003e15.6.1 Periodic EGARCH 708\u003c\/p\u003e \u003cp\u003e15.7 Nesting Models 708\u003c\/p\u003e \u003cp\u003e15.8 Long-Memory GARCH Models 713\u003c\/p\u003e \u003cp\u003e15.8.1 The FIGARCH Model 716\u003c\/p\u003e \u003cp\u003e15.8.2 The FIEGARCH Model 719\u003c\/p\u003e \u003cp\u003e15.9 Estimation 720\u003c\/p\u003e \u003cp\u003e15.9.1 Likelihood Computation 720\u003c\/p\u003e \u003cp\u003e15.10 Inference 722\u003c\/p\u003e \u003cp\u003e15.10.1 Testing for ARCH Effects 722\u003c\/p\u003e \u003cp\u003e15.10.2 Test for Asymmetric Effects 723\u003c\/p\u003e \u003cp\u003e15.11 Multivariate GARCH 725\u003c\/p\u003e \u003cp\u003e15.11.1 BEKK Parameterization of MGARCH 726\u003c\/p\u003e \u003cp\u003e15.11.2 The Dynamic Conditional Correlation Model 726\u003c\/p\u003e \u003cp\u003e15.12 Empirical Applications 727\u003c\/p\u003e \u003cp\u003e15.12.1 Univariate Volatility Modelling 727\u003c\/p\u003e \u003cp\u003e15.12.2 A Simple Risk Measurement Application: A Bivariate Example with Copulas 733\u003c\/p\u003e \u003cp\u003e15.13 Software 740\u003c\/p\u003e \u003cp\u003eReferences 748\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 16 Pricing Commodity Swaps with Counterparty Credit Risk: The Case of Credit Value Adjustment 755\u003cbr\u003e \u003c\/b\u003e\u003ci\u003eMarina Marena, Gianluca Fusai and Chiara Quaglini\u003c\/i\u003e\u003c\/p\u003e \u003cp\u003e16.1 Introduction 755\u003c\/p\u003e \u003cp\u003e16.1.1 Energy Company Strategies in Derivative Instruments 755\u003c\/p\u003e \u003cp\u003e16.2 Company Energy Policy 756\u003c\/p\u003e \u003cp\u003e16.2.1 Commodity Risk 756\u003c\/p\u003e \u003cp\u003e16.2.2 Credit Risk 757\u003c\/p\u003e \u003cp\u003e16.3 A Focus on Commodity Swap Contracts 758\u003c\/p\u003e \u003cp\u003e16.3.1 Definition and Main Features of a Commodity Swap 758\u003c\/p\u003e \u003cp\u003e16.4 Modelling the Dynamics of Oil Spot Prices and the Forward Curve 760\u003c\/p\u003e \u003cp\u003e16.4.1 The Schwartz and Smith Pricing Model 760\u003c\/p\u003e \u003cp\u003e16.5 An Empirical Application 764\u003c\/p\u003e \u003cp\u003e16.5.1 The Commodity Swap Features 764\u003c\/p\u003e \u003cp\u003e16.5.2 Calibration of the Theoretical Schwartz and Smith Forward Curve 765\u003c\/p\u003e \u003cp\u003e16.5.3 The Monte Carlo Simulation of Oil Spot Prices 772\u003c\/p\u003e \u003cp\u003e16.5.4 The Computation of Brent Forward Curves at Any Given Valuation Date 773\u003c\/p\u003e \u003cp\u003e16.6 Measuring Counterparty Risk 777\u003c\/p\u003e \u003cp\u003e16.6.1 CVA Calculation 779\u003c\/p\u003e \u003cp\u003e16.6.2 Swap Fixed Price Adjustment for Counterparty Risk 782\u003c\/p\u003e \u003cp\u003e16.6.3 Right- and Wrong-Way Risk 784\u003c\/p\u003e \u003cp\u003e16.7 Sensitivity Analysis 788\u003c\/p\u003e \u003cp\u003e16.8 Accounting for Derivatives and Credit Value Adjustments 788\u003c\/p\u003e \u003cp\u003e16.8.1 Example of Hedge Effectiveness 791\u003c\/p\u003e \u003cp\u003e16.8.2 Accounting for CVA 796\u003c\/p\u003e \u003cp\u003e16.9 Conclusions 797\u003c\/p\u003e \u003cp\u003eReferences 798\u003c\/p\u003e \u003cp\u003eFurther Reading 798\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 17 Pricing Energy Spread Options 801\u003cbr\u003e \u003c\/b\u003e\u003ci\u003eFred Espen Benth and Hanna Zdanowicz\u003c\/i\u003e\u003c\/p\u003e \u003cp\u003e17.1 Spread Options in Energy Markets 801\u003c\/p\u003e \u003cp\u003e17.2 Pricing of Spread Options with Zero Strike 805\u003c\/p\u003e \u003cp\u003e17.3 Issues of hedging 813\u003c\/p\u003e \u003cp\u003e17.4 Pricing of Spread Options with Nonzero Strike 815\u003c\/p\u003e \u003cp\u003e17.4.1 Kirk’s Approximation Formula 817\u003c\/p\u003e \u003cp\u003e17.4.2 Approximation by Margrabe Based on Taylor Expansion 820\u003c\/p\u003e \u003cp\u003e17.4.3 Other Pricing Methods 823\u003c\/p\u003e \u003cp\u003eAcknowledgement 824\u003c\/p\u003e \u003cp\u003eReferences 825\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 18 Asian Options: Payoffs and Pricing Models 827\u003cbr\u003e \u003c\/b\u003e\u003ci\u003eGianluca Fusai, Marina Marena and Giovanni Longo\u003c\/i\u003e\u003c\/p\u003e \u003cp\u003e18.1 Payoff Structures 832\u003c\/p\u003e \u003cp\u003e18.2 Pricing Asian Options in the Lognormal Setting 833\u003c\/p\u003e \u003cp\u003e18.2.1 Moment Matching 835\u003c\/p\u003e \u003cp\u003e18.2.2 Lower Price Bound 844\u003c\/p\u003e \u003cp\u003e18.2.3 Monte carlo simulation 845\u003c\/p\u003e \u003cp\u003e18.3 A Comparison 856\u003c\/p\u003e \u003cp\u003e18.4 The Flexible Square-Root Model 858\u003c\/p\u003e \u003cp\u003e18.4.1 General Setup 861\u003c\/p\u003e \u003cp\u003e18.4.2 Numerical Results 870\u003c\/p\u003e \u003cp\u003e18.4.3 A Case Study 871\u003c\/p\u003e \u003cp\u003e18.5 Conclusions 874\u003c\/p\u003e \u003cp\u003eReferences 874\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 19 Natural Gas Storage Modelling 877\u003cbr\u003e \u003c\/b\u003e\u003ci\u003eA´lvaro Cartea, James Cheeseman and Sebastian Jaimungal\u003c\/i\u003e\u003c\/p\u003e \u003cp\u003e19.1 Introduction 877\u003c\/p\u003e \u003cp\u003e19.2 A Simple Model of Storage, Futures Prices, Spot Prices And Convenience Yield 878\u003c\/p\u003e \u003cp\u003e19.3 Valuation of Gas Storage 880\u003c\/p\u003e \u003cp\u003e19.3.1 Least-Squares Monte Carlo 881\u003c\/p\u003e \u003cp\u003e19.3.2 LSMC Greeks 883\u003c\/p\u003e \u003cp\u003e19.3.3 Extending the LSMC to Price Gas Storage 883\u003c\/p\u003e \u003cp\u003e19.3.4 Toy Storage Model 884\u003c\/p\u003e \u003cp\u003e19.3.5 Storage LSMC 888\u003c\/p\u003e \u003cp\u003e19.3.6 Swing Options 890\u003c\/p\u003e \u003cp\u003e19.3.7 Closed-Form Storage Solution 891\u003c\/p\u003e \u003cp\u003e19.3.8 Monte Carlo Convergence 892\u003c\/p\u003e \u003cp\u003e19.3.9 Simulated Storage Operations 894\u003c\/p\u003e \u003cp\u003e19.3.10 Storage Value 897\u003c\/p\u003e \u003cp\u003eReferences 899\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 20 Commodity-Linked Arbitrage Strategies and Portfolio Management 901\u003cbr\u003e \u003c\/b\u003e\u003ci\u003eViviana Fanelli\u003c\/i\u003e\u003c\/p\u003e \u003cp\u003e20.1 Commodity-Linked Arbitrage Strategies 902\u003c\/p\u003e \u003cp\u003e20.1.1 The Efficient Market Hypothesis 902\u003c\/p\u003e \u003cp\u003e20.1.2 Risk Arbitrage Opportunities in Commodity Markets 903\u003c\/p\u003e \u003cp\u003e20.1.3 Basic Quantitative Trading Strategies 906\u003c\/p\u003e \u003cp\u003e20.1.4 A General Statistical Arbitrage Trading Methodology 914\u003c\/p\u003e \u003cp\u003e20.2 Portfolio Optimization with Commodities 921\u003c\/p\u003e \u003cp\u003e20.2.1 Commodities as an Asset Class 921\u003c\/p\u003e \u003cp\u003e20.2.2 Commodity Futures Return Characteristics 923\u003c\/p\u003e \u003cp\u003e20.2.3 Risk Premiums in Commodity Markets 925\u003c\/p\u003e \u003cp\u003e20.2.4 Commodities as a Portfolio Diversifier 928\u003c\/p\u003e \u003cp\u003e20.2.5 Risk–Return Optimization in Commodity Portfolios 929 Symbols 936\u003c\/p\u003e \u003cp\u003eReferences 936\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 21 Econometric Analysis of Energy and Commodity Markets: Multiple Hypothesis Testing Techniques 939\u003cbr\u003e \u003c\/b\u003e\u003ci\u003eMark Cummins\u003c\/i\u003e\u003c\/p\u003e \u003cp\u003e21.1 Introduction 939\u003c\/p\u003e \u003cp\u003e21.2 Multiple Hypothesis Testing 940\u003c\/p\u003e \u003cp\u003e21.2.1 Generalized Familywise Error Rate 941\u003c\/p\u003e \u003cp\u003e21.2.2 Per-Familywise Error Rate 942\u003c\/p\u003e \u003cp\u003e21.2.3 False Discovery Proportion 942\u003c\/p\u003e \u003cp\u003e21.2.4 False Discovery Rate 943\u003c\/p\u003e \u003cp\u003e21.2.5 Single-Step and Stepwise Procedures 943\u003c\/p\u003e \u003cp\u003e21.3 Energy–Emissions Market Interactions 943\u003c\/p\u003e \u003cp\u003e21.3.1 Literature Review 943\u003c\/p\u003e \u003cp\u003e21.3.2 Data Description 944\u003c\/p\u003e \u003cp\u003e21.3.3 Testing Framework 945\u003c\/p\u003e \u003cp\u003e21.3.4 Empirical Results 950\u003c\/p\u003e \u003cp\u003e21.4 Emissions Market Interactions 953\u003c\/p\u003e \u003cp\u003e21.4.1 Testing Framework and Data 953\u003c\/p\u003e \u003cp\u003e21.4.2 Empirical Results 955\u003c\/p\u003e \u003cp\u003e21.5 Quantitative Spread Trading in Oil Markets 956\u003c\/p\u003e \u003cp\u003e21.5.1 Testing Framework and Data 956\u003c\/p\u003e \u003cp\u003e21.5.2 Optimal Statistical Arbitrage Model 957\u003c\/p\u003e \u003cp\u003e21.5.3 Resampling-Based MHT Procedures 959\u003c\/p\u003e \u003cp\u003e21.5.4 Empirical Results 964\u003c\/p\u003e \u003cp\u003eReferences 964\u003c\/p\u003e \u003cp\u003eAppendix A Quick Review of Distributions Relevant in Finance with Matlab\u003csup\u003e®\u003c\/sup\u003e Examples 967\u003cb\u003e\u003cbr\u003e \u003c\/b\u003e\u003ci\u003eLaura Ballotta and Gianluca Fusai\u003c\/i\u003e\u003c\/p\u003e \u003cp\u003eIndex 1005\u003c\/p\u003e","brand":"John Wiley \u0026 Sons Inc","offers":[{"title":"Default Title","offer_id":48733787586903,"sku":"9780470745243","price":99.75,"currency_code":"GBP","in_stock":true}],"thumbnail_url":"\/\/cdn.shopify.com\/s\/files\/1\/0817\/1739\/5799\/files\/9780470745243.jpg?v=1720001687","url":"https:\/\/bookcurl.com\/products\/handbook-of-multicommodity-markets-and-products-9780470745243","provider":"Book Curl","version":"1.0","type":"link"}