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. This non-technical yet sophisticated manual covers everything the professional needs to become acquainted with the structure, function, rules, and practices across a wide spectrum of commodity markets. Contributions from a global team of renowned industry experts provide real-world examples for each market, along with tools for analyzing, pricing, and risk managing deals. The discussion focuses on convergence, including arbitrage valuation, econometric modeling, market structure analysis, contract engineering, and risk, while simulated scenarios help readers understand the practical application of the methods and models presented.
Introduction:
The content of the book is organised into two parts. Part I contains chapters devoted to a wide variety of commodity markets. including the core energy markets of oil, coal, gas and elec-tricity, along with the key commodity markets of industrial metals and agriculturals. Shipping markets as the fundamental link in the globalisation of commodities are presented, in addition to other important related markets such as emissions, weather and foreign exchange. Presenta-tions are self-contained and can be read independently of one another or, in line with the focus of the book, jointly in any desired sequence.
Market features and main functioning rules of the market in question are introduced at the outset of each chapter. Then, basic financial products and standardised deals are described using case examples, where appropriate, underlying the contract structure and the corresponding financial use for the client. Quantitative models for pricing and hedging commodity derivatives are presented and illustrated using practical exam-ples. Issues in structuring, pricing, selling, and hedging are examined from a problem-solving viewpoint.
Part II contains chapters of a technical and methodological nature. Our practical approach allows us to deliver a comprehensive reference manual that the user may consult when tackling daily valuation, hedging and econometric problems. Excessively technical details are left to further reading. Our primary focus is on the concrete implementation of the proposed methodologies. The chapters are presented in a self-contained manner and introduce the reader to topics such as: stochastic modelling;modelling and estimation, using filtering and non-parametric techniques, of commodity price and volatility dynamics; construction of forward curves in commodity markets, with a special emphasis on electricity; GARCH models and variance modelling with applications to risk analysis; pricing and hedging of strategically important derivative structures, such as spread options and asian options; measurement of counterparty credit risk arising in OTC non-collateralized derivative transactions; modelling of natural gas storage capacity; and techniques for the quantitative trading of commodities, with applications to the optimization and assessment of commodity portfolios and spread trading.
Contents:
- Oil Markets and Products
- Coal Markets and Products
- Natural Gas Markets and Products
- Electricity Markets and Products
- Emissions Markets and Products
- Weather Risk and Weather Derivatives
- Industrial Metals Markets and Products
- Freight Markets and Products
- Agricultural and Soft Markets
- Foreign Exchange Markets and Products
- An Introduction to Stochastic Calculus with Matlab Examples
- Estimating Commodity Term Structure Volatilities
- Nonparametric Estimation of Energy and Commodity Price Processes
- How to Build Electricity Forward Curves
- GARCH Models for Commodity Markets
- Pricing Commodity Swaps with Counterparty Credit Risk: The Case of Credit Value Adjustment
- Pricing Energy Spread Options
- Asian Options: Payoffs and Pricing Models
- Natural Gas Storage Modelling
- Commodity-Linked Arbitrage Strategies and Portfolio Management
- Econometric Analysis of Energy and Commodity Markets: Multiple Hypothesis Testing Techniques