{"product_id":"fuel-hedging-and-risk-management-isbn-9781119026723","title":"Fuel Hedging and Risk Management","description":"\u003cp\u003e\u003cb\u003eA hands-on guide to navigating the new fuel markets\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003ci\u003eFuel Hedging and Risk Management: Strategies for Airlines, Shippers and Other Consumers \u003c\/i\u003eprovides a clear and practical understanding of commodity price dynamics, key fuel hedging techniques, and risk management strategies for the corporate fuel consumer. It covers the commodity markets and derivative instruments in a manner accessible to corporate treasurers, financial officers, risk managers, commodity traders, structurers, as well as quantitative professionals dealing in the energy markets.\u003c\/p\u003e \u003cp\u003eThe book includes a wide variety of key topics related to commodities and derivatives markets, financial risk analysis of commodity consumers, hedge program design and implementation, vanilla derivatives and exotic hedging products. The book is unique in providing intuitive guidance on understanding the dynamics of forward curves and volatility term structure for commodities, fuel derivatives valuation and counterparty risk concepts such as CVA, DVA and FVA. Fully up-to-date and relevant, this book includes comprehensive case studies that illustrate the hedging process from conception to execution and monitoring of hedges in diverse situations.\u003c\/p\u003e \u003cp\u003eThis practical guide will help the reader:\u003c\/p\u003e \u003cul\u003e \u003cli\u003eGain expert insight into all aspects of fuel hedging, price and volatility drivers and dynamics.\u003c\/li\u003e \u003cli\u003eDevelop a framework for financial risk analysis and hedge programs.\u003c\/li\u003e \u003cli\u003eNavigate volatile energy markets by employing effective risk management techniques.\u003c\/li\u003e \u003cli\u003eManage unwanted risks associated with commodity derivatives by understanding liquidity and credit risk calculations, exposure optimization techniques, credit charges such as CVA, DVA, FVA, etc.\u003c\/li\u003e \u003c\/ul\u003e \u003cp\u003ePreface xiii\u003c\/p\u003e \u003cp\u003eAcknowledgments xix\u003c\/p\u003e \u003cp\u003eAbout the Authors xxi\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 1 Energy Commodities and Price Formation 1\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eEnergy as a Strategic Resource 1\u003c\/p\u003e \u003cp\u003eEnergy as a Tradable Commodity 3\u003c\/p\u003e \u003cp\u003eEnergy Commodities 5\u003c\/p\u003e \u003cp\u003eCrude Oil 5\u003c\/p\u003e \u003cp\u003eOil Products 8\u003c\/p\u003e \u003cp\u003eNatural Gas 11\u003c\/p\u003e \u003cp\u003eCoal 11\u003c\/p\u003e \u003cp\u003ePrice Drivers in Energy Markets 12\u003c\/p\u003e \u003cp\u003eGeopolitical Risks 12\u003c\/p\u003e \u003cp\u003eThe Geopolitical Chessboard – The Petrodollar System and Rising China 12\u003c\/p\u003e \u003cp\u003eLong-Term Supply and Demand 15\u003c\/p\u003e \u003cp\u003eShort-Term Supply and Demand: Supply Chain and Infrastructure 17\u003c\/p\u003e \u003cp\u003eFinancialization of Commodities 19\u003c\/p\u003e \u003cp\u003eMarket-Specific Price Drivers 19\u003c\/p\u003e \u003cp\u003eSummary 20\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 2 Major Energy Consumers and the Rationale for Fuel Hedging 23\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eEnergy Market Participants 23\u003c\/p\u003e \u003cp\u003eRisks Faced by Fuel Consumers – The Case of the Airline Industry 27\u003c\/p\u003e \u003cp\u003eAirline Industry – Metrics and Operational Risks 27\u003c\/p\u003e \u003cp\u003eAirline Industry – Financial Risks 30\u003c\/p\u003e \u003cp\u003eRisks Faced by Other Major Fuel Consumers 35\u003c\/p\u003e \u003cp\u003eShipping Companies 35\u003c\/p\u003e \u003cp\u003eLand Transportation 37\u003c\/p\u003e \u003cp\u003eOil Refining, Petrochemicals, and Power Generation 37\u003c\/p\u003e \u003cp\u003eIndustrial Users of Energy Commodities 38\u003c\/p\u003e \u003cp\u003eThe Case for Hedging 39\u003c\/p\u003e \u003cp\u003eThe Effect of Hedging on Airline Stock Price Volatility 39\u003c\/p\u003e \u003cp\u003eCommodity Derivative Markets 41\u003c\/p\u003e \u003cp\u003eA Brief History of Commodity Markets 42\u003c\/p\u003e \u003cp\u003eCommodity Spot Markets and the Need for Standardization 43\u003c\/p\u003e \u003cp\u003eForward Contracts 44\u003c\/p\u003e \u003cp\u003eFutures Contracts 45\u003c\/p\u003e \u003cp\u003eOption Contracts 50\u003c\/p\u003e \u003cp\u003eSummary 53\u003c\/p\u003e \u003cp\u003eAppendix A 54\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 3 Developing Fuel Hedging Strategies 55\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eThe Rationale for Commodity Hedging 55\u003c\/p\u003e \u003cp\u003eDeveloping a Fuel Hedging Program 57\u003c\/p\u003e \u003cp\u003eRisk Identification and Assessment 57\u003c\/p\u003e \u003cp\u003eTypes of Risk 58\u003c\/p\u003e \u003cp\u003eRisk Identification 59\u003c\/p\u003e \u003cp\u003eForecasting Prices and Conducting Simulations 59\u003c\/p\u003e \u003cp\u003eArticulating the Firm’s Risk Appetite 60\u003c\/p\u003e \u003cp\u003eSetting Objectives for Fuel Hedging and the Scope of Hedging 60\u003c\/p\u003e \u003cp\u003eIdentifying Risk Managers within the Organization 61\u003c\/p\u003e \u003cp\u003eDetermining the Scope of the Hedge Program 61\u003c\/p\u003e \u003cp\u003eImplementation of Hedging 62\u003c\/p\u003e \u003cp\u003eSelecting the Fuel Cost Management Method 62\u003c\/p\u003e \u003cp\u003eIdentifying the Underlying to Hedge with and Basis Risk 63\u003c\/p\u003e \u003cp\u003eQuantity and Tenor of Hedging 66\u003c\/p\u003e \u003cp\u003eSelection of Instruments for Hedging 67\u003c\/p\u003e \u003cp\u003eMarket Risk 68\u003c\/p\u003e \u003cp\u003eManagement of the Unwanted Risks of a Portfolio 68\u003c\/p\u003e \u003cp\u003eCredit Risk 68\u003c\/p\u003e \u003cp\u003eLiquidity Risk 69\u003c\/p\u003e \u003cp\u003eOperational Risk 69\u003c\/p\u003e \u003cp\u003eLegal and Reputational Risk 70\u003c\/p\u003e \u003cp\u003eMonitoring and Calibration of the Hedging Program 70\u003c\/p\u003e \u003cp\u003eTemplate for a Risk Management Policy 71\u003c\/p\u003e \u003cp\u003eThe Airline Industry – Trends in Fuel Risk Management 71\u003c\/p\u003e \u003cp\u003eMagnitude of Fuel Price Risk 71\u003c\/p\u003e \u003cp\u003eUnderlyings and Hedging Instruments 73\u003c\/p\u003e \u003cp\u003eQuantity and Tenor of Hedging 74\u003c\/p\u003e \u003cp\u003eRecent Developments 75\u003c\/p\u003e \u003cp\u003eSummary 75\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 4 Shipping and Airlines – Basics of Fuel Hedging 77\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eSpot–Forward Relationships 77\u003c\/p\u003e \u003cp\u003eTheories on the Shape of Forward Curves 78\u003c\/p\u003e \u003cp\u003eSpot–Forward Relationships for Investment Assets 79\u003c\/p\u003e \u003cp\u003eSpot–Forward Relationships for Commodities 80\u003c\/p\u003e \u003cp\u003eSpot and Futures Volatility 81\u003c\/p\u003e \u003cp\u003eOptions 82\u003c\/p\u003e \u003cp\u003eCall and Put Options 83\u003c\/p\u003e \u003cp\u003ePut–Call Parity 84\u003c\/p\u003e \u003cp\u003eOption-Based Hedging for a Shipping Company 85\u003c\/p\u003e \u003cp\u003eImplied Volatility and the Black–Scholes Model 86\u003c\/p\u003e \u003cp\u003eThe Black–Scholes–Merton Model 88\u003c\/p\u003e \u003cp\u003eBlack’s Model for Pricing Options on Futures Contracts 89\u003c\/p\u003e \u003cp\u003eThe Greeks 89\u003c\/p\u003e \u003cp\u003eDelta 90\u003c\/p\u003e \u003cp\u003eGamma 92\u003c\/p\u003e \u003cp\u003eTheta 92\u003c\/p\u003e \u003cp\u003eVega 94\u003c\/p\u003e \u003cp\u003eRho 94\u003c\/p\u003e \u003cp\u003eHigher-Order Greeks 95\u003c\/p\u003e \u003cp\u003eBlack’s Model Option Greeks 95\u003c\/p\u003e \u003cp\u003eAsian Swaps and Options 96\u003c\/p\u003e \u003cp\u003eAsian Swap-Based Hedging for a Shipping Company 97\u003c\/p\u003e \u003cp\u003eOption Structures 97\u003c\/p\u003e \u003cp\u003eCall Spreads and Put Spreads 97\u003c\/p\u003e \u003cp\u003eCollars, Three-Ways, and Calendar Spread Options 99\u003c\/p\u003e \u003cp\u003eStraddles, Strangles, and Butterflies 100\u003c\/p\u003e \u003cp\u003eCapped Forwards 102\u003c\/p\u003e \u003cp\u003eCapped Swap Usage for a Shipping Company 103\u003c\/p\u003e \u003cp\u003eDerivatives Pricing 104\u003c\/p\u003e \u003cp\u003eStochastic Processes for Asset Prices – An Introduction 104\u003c\/p\u003e \u003cp\u003eBrownian Motion and Wiener Processes 104\u003c\/p\u003e \u003cp\u003eItô’s Lemma 106\u003c\/p\u003e \u003cp\u003eOption Pricing Using the Black–Scholes–Merton Formula 107\u003c\/p\u003e \u003cp\u003eAsian Option Pricing 109\u003c\/p\u003e \u003cp\u003eSummary 112\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 5 Advanced Hedging and Forward Curve Dynamics 113\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eSwap and Vanilla Option-Based Structures 113\u003c\/p\u003e \u003cp\u003eZero-Cost Structures and the Usage of Options 114\u003c\/p\u003e \u003cp\u003eLeveraged Swaps 114\u003c\/p\u003e \u003cp\u003eCapped Swaps 116\u003c\/p\u003e \u003cp\u003eFloored Swaps 117\u003c\/p\u003e \u003cp\u003eThe Volatility Surface 118\u003c\/p\u003e \u003cp\u003eMulti-option Structures 119\u003c\/p\u003e \u003cp\u003eZero-Cost Collar 120\u003c\/p\u003e \u003cp\u003eThree-Ways 120\u003c\/p\u003e \u003cp\u003eRisk Reversals and their Hedging 121\u003c\/p\u003e \u003cp\u003eEarly-Expiry Options and Instantaneous Volatility Term Structures 122\u003c\/p\u003e \u003cp\u003eThe Samuelson Effect and the Storage Theory 122\u003c\/p\u003e \u003cp\u003eImplied Volatility of Energy Futures Contracts 123\u003c\/p\u003e \u003cp\u003eEarly-Expiry Profile Construction 124\u003c\/p\u003e \u003cp\u003eCommodity Swaptions and Extendible Swaps 127\u003c\/p\u003e \u003cp\u003eUsage of Commodity Swaptions and the Reasons for their Popularity 127\u003c\/p\u003e \u003cp\u003eSwaption vs. a Basket of Options 128\u003c\/p\u003e \u003cp\u003eUnderstanding Commodity Futures Term Structures 133\u003c\/p\u003e \u003cp\u003eThe Normal Backwardation or Keynesian Theory 133\u003c\/p\u003e \u003cp\u003eThe Theory of Storage 134\u003c\/p\u003e \u003cp\u003eTerm-Structure Models 135\u003c\/p\u003e \u003cp\u003eSchwartz’s One-Factor Model 135\u003c\/p\u003e \u003cp\u003eSchwartz’s Two-Factor Model 136\u003c\/p\u003e \u003cp\u003eGabillon’s Model 137\u003c\/p\u003e \u003cp\u003eGabillon’s Stochastic Equation for Futures 138\u003c\/p\u003e \u003cp\u003eEarly-Expiry Profile Using Gabillon’s Model 139\u003c\/p\u003e \u003cp\u003eImportance of Early-Expiry Profile for Exotic Products 139\u003c\/p\u003e \u003cp\u003eSummary 140\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 6 Exotic Hedging and Volatility Dynamics 141\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eExtendible Option Structures 142\u003c\/p\u003e \u003cp\u003eExtendible Collar 142\u003c\/p\u003e \u003cp\u003eExtendible Three-Ways 143\u003c\/p\u003e \u003cp\u003eCancellable – Extendible Parity 144\u003c\/p\u003e \u003cp\u003ePricing Extendible Option Structures 146\u003c\/p\u003e \u003cp\u003eVolatility Models 150\u003c\/p\u003e \u003cp\u003eStochastic Volatility Models 150\u003c\/p\u003e \u003cp\u003eBarrier Option-Based Structures 152\u003c\/p\u003e \u003cp\u003eKnock-Out Options and Knock-In Options 152\u003c\/p\u003e \u003cp\u003eRelationship between KI and KO Options 154\u003c\/p\u003e \u003cp\u003eKnock-Out Swaps 154\u003c\/p\u003e \u003cp\u003eAirbag Structure 154\u003c\/p\u003e \u003cp\u003eKIKOs and Combinations of KI and KO Options 155\u003c\/p\u003e \u003cp\u003eAccumulator Structures 156\u003c\/p\u003e \u003cp\u003eEuropean or Asian-Style Barrier Options 157\u003c\/p\u003e \u003cp\u003eBarrier Payouts and Non-linearity – Digital Options and Replication 157\u003c\/p\u003e \u003cp\u003eThe Reflection Principle 160\u003c\/p\u003e \u003cp\u003eBarrier Options Under the Black–Scholes Framework 161\u003c\/p\u003e \u003cp\u003ePut–Call Symmetry 163\u003c\/p\u003e \u003cp\u003eMTM Analysis of Barrier Options Under the Black–Scholes Framework 163\u003c\/p\u003e \u003cp\u003ePricing and Risk Management of Barriers with Real-World Constraints 165\u003c\/p\u003e \u003cp\u003eBarrier Options on a Nearby Futures Contract 167\u003c\/p\u003e \u003cp\u003eLocal Volatility Models 168\u003c\/p\u003e \u003cp\u003eBermudan Extendible Structures 170\u003c\/p\u003e \u003cp\u003eValuation of Bermudan Extendibles 174\u003c\/p\u003e \u003cp\u003eLongstaff–Schwartz Method and Exercise Boundaries 174\u003c\/p\u003e \u003cp\u003eExtendible vs. Auto-callable Transactions 177\u003c\/p\u003e \u003cp\u003eBermudan Extendibles and the Forward Skew 177\u003c\/p\u003e \u003cp\u003eThe Inverse Leverage Effect in Commodities Markets 179\u003c\/p\u003e \u003cp\u003eTarget Redemption Structures 180\u003c\/p\u003e \u003cp\u003eTarget Redemptions and the 2008 Debacle 182\u003c\/p\u003e \u003cp\u003eDefining Leverage 183\u003c\/p\u003e \u003cp\u003eTarget Redemption Pricing and Risk Management 184\u003c\/p\u003e \u003cp\u003eThe Mean-Reversion Trap 185\u003c\/p\u003e \u003cp\u003eTarget Redemption and Trading Risks 186\u003c\/p\u003e \u003cp\u003eSticky Strike and Sticky Delta 187\u003c\/p\u003e \u003cp\u003eSticky Strike Approach 187\u003c\/p\u003e \u003cp\u003eSticky Delta or Sticky Moneyness 188\u003c\/p\u003e \u003cp\u003eGamma\/Theta Ratio 188\u003c\/p\u003e \u003cp\u003eSummary 190\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 7 Fuel Hedging and Counterparty Risk 191\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eThe Importance of Valuation and Transaction Monitoring 191\u003c\/p\u003e \u003cp\u003eMarket Risk Management 192\u003c\/p\u003e \u003cp\u003eFuel Hedgers: Lottery Tickets and Spring Cleaning 193\u003c\/p\u003e \u003cp\u003eValue at Risk 194\u003c\/p\u003e \u003cp\u003eLiquidity Risk 195\u003c\/p\u003e \u003cp\u003eCounterparty Risk 195\u003c\/p\u003e \u003cp\u003eCredit Risk and Counterparty Risk 196\u003c\/p\u003e \u003cp\u003eExpected Exposure 198\u003c\/p\u003e \u003cp\u003ePotential Future Exposure 198\u003c\/p\u003e \u003cp\u003eMeasurement of Counterparty Risk for a Portfolio of Trades 198\u003c\/p\u003e \u003cp\u003ePeak PFE 198\u003c\/p\u003e \u003cp\u003eCommon PFE Misconceptions and Pitfalls 200\u003c\/p\u003e \u003cp\u003eCredit Exposure Optimization Techniques 202\u003c\/p\u003e \u003cp\u003eBilateral Netting Agreements 202\u003c\/p\u003e \u003cp\u003eCredit Support Annexes 203\u003c\/p\u003e \u003cp\u003eCSA Negotiations – Key Considerations 203\u003c\/p\u003e \u003cp\u003eFunding Valuation Adjustment 206\u003c\/p\u003e \u003cp\u003eFuel Hedgers and FVA 207\u003c\/p\u003e \u003cp\u003eThe FVA Debate 209\u003c\/p\u003e \u003cp\u003eThe Price of Counterparty Credit Risk 209\u003c\/p\u003e \u003cp\u003eCredit Derivatives and Credit Default Swaps 210\u003c\/p\u003e \u003cp\u003eCredit Valuation Adjustment 212\u003c\/p\u003e \u003cp\u003eCommon CVA Mis-steps 213\u003c\/p\u003e \u003cp\u003eGap Options and Collateralization Agreements 213\u003c\/p\u003e \u003cp\u003eDebt Valuation Adjustment 214\u003c\/p\u003e \u003cp\u003eFuel Hedgers and Debt Valuation Adjustments 214\u003c\/p\u003e \u003cp\u003eThe Case for Bilateral CVA 215\u003c\/p\u003e \u003cp\u003eWrong-Way Risk 216\u003c\/p\u003e \u003cp\u003eCounterparty Credit Risk Hedging 216\u003c\/p\u003e \u003cp\u003eContingent CDS 216\u003c\/p\u003e \u003cp\u003eCapped Exposure Derivatives 217\u003c\/p\u003e \u003cp\u003eSummary 217\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 8 Conducting Scenario Analysis 219\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eScenario Analysis for Vanilla Products 220\u003c\/p\u003e \u003cp\u003eScenario Analysis for Path-Dependent Products 224\u003c\/p\u003e \u003cp\u003eMTM-Based Scenario Analysis and Potential Future Exposures 229\u003c\/p\u003e \u003cp\u003eBeyond Payoffs and MTMs – Collateralization and Funding Requirement Analysis 230\u003c\/p\u003e \u003cp\u003eHedge Effectiveness 231\u003c\/p\u003e \u003cp\u003eSummary 233\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 9 Financing and Risk Management: Bundled Solutions 235\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eStructured Aviation Finance Overview 235\u003c\/p\u003e \u003cp\u003eAirline Financing via Debt and Aircraft Leases 238\u003c\/p\u003e \u003cp\u003eTerm Loans 239\u003c\/p\u003e \u003cp\u003eExport Credit Agency Debt 240\u003c\/p\u003e \u003cp\u003eLeases 240\u003c\/p\u003e \u003cp\u003eRationale for Combining Hedging and Financing 243\u003c\/p\u003e \u003cp\u003eReduction of Default Risk through Hedging 244\u003c\/p\u003e \u003cp\u003eOil-Linked Financing Structures 245\u003c\/p\u003e \u003cp\u003eFlexible Oil-Insulated Lease 246\u003c\/p\u003e \u003cp\u003eCancellable Hedged Loans as Interest Cheapeners 250\u003c\/p\u003e \u003cp\u003eSummary 252\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 10 Applied Fuel Hedging – Case Studies 253\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eCase Study 1: YM Cargo Inc. 253\u003c\/p\u003e \u003cp\u003eBusiness Risks 253\u003c\/p\u003e \u003cp\u003eOperational Mitigants 254\u003c\/p\u003e \u003cp\u003eRisk Appetite 255\u003c\/p\u003e \u003cp\u003eHedge Program Objectives and Scope 255\u003c\/p\u003e \u003cp\u003eImplementation of Hedging 256\u003c\/p\u003e \u003cp\u003ePortfolio Monitoring 260\u003c\/p\u003e \u003cp\u003eCase Study 2: Worldwide Airlines 260\u003c\/p\u003e \u003cp\u003eEvolution of WWA’s Hedging Strategy 262\u003c\/p\u003e \u003cp\u003eHedging Transactions Executed by WWA 264\u003c\/p\u003e \u003cp\u003eHedge Portfolio Analysis 267\u003c\/p\u003e \u003cp\u003eCredit Lines and Collateralization Issues 269\u003c\/p\u003e \u003cp\u003eRestructuring WWA’s Portfolio 271\u003c\/p\u003e \u003cp\u003eCounterparty Risk and Funding Considerations for BMC 272\u003c\/p\u003e \u003cp\u003eSummary 276\u003c\/p\u003e \u003cp\u003eBibliography 277\u003c\/p\u003e \u003cp\u003eIndex 281\u003c\/p\u003e \u003cp\u003e\u003cb\u003eSIMO M. DAFIR\u003c\/b\u003e is a Managing Director at Volguard, a financial consulting firm specializing in Capital Markets, Wealth Management and Derivatives. He has over fourteen years of experience during which he has held senior positions in a number of major international banks in Hong Kong and Singapore. He was the Regional Head of Commodity Structuring at Standard Chartered Bank, Head of Commodity Exotics and Hybrids at Merrill Lynch Asia, and Trader of Credit Derivatives at Credit Suisse. He is also Professor of Global Financial Markets at Sorbonne Assas International Law School and an expert witness for financial markets litigations. Dafir started his career in Aerospace and Telecom at the European Space Agency and Alcatel. He holds an MBA from INSEAD, a Post Graduate Research Degree from the National Polytechnic Institute of Toulouse, an MSc in Automation from ENSEEIHT and a Bachelor's degree in Mathematics.\u003c\/p\u003e \u003cp\u003e\u003cb\u003eVISHNU N. GAJJALA\u003c\/b\u003e is a commodity derivatives expert at Volguard, where he oversees the financial market analytics business. He has held positions in commodities structuring and sales at institutions including Standard Chartered Bank and Merrill Lynch, where he developed customized strategies for commodity hedgers and investors, including airlines, mining companies, trading houses, private banks and sovereign wealth funds. He holds a Bachelor's degree in Electrical Engineering from IIT Madras and an MBA from IIM Bangalore. Vishnu currently resides in Singapore.\u003c\/p\u003e \u003cp\u003eOver the last decade, energy prices have displayed a unique set of risk characteristics that have arisen in an ever-evolving, deeply geopolitical and highly volatile market. Fuel consuming industries have seen major structural and operational changes, with financial risk management even superseding operational management in determining profitability. Commodity derivative providers have also gone through tumultuous periods of growth and contraction, punctuated by events like defaults and business closures, multiplying the risks to consumers.\u003c\/p\u003e \u003cp\u003eWritten by highly experienced practitioners, \u003ci\u003eFuel Hedging and Risk Management\u003c\/i\u003e presents practical hedging solutions to harness fuel price volatility, while developing a holistic understanding of the risk management process from conception to execution. The authors cover commodity derivative instruments in a manner accessible to corporate treasurers, risk managers, legal and financial officers, commodity traders, structurers, as well as quantitative professionals dealing in the energy markets.\u003c\/p\u003e \u003cp\u003eNewcomers to fuel hedging will benefit from the description of energy markets and their development, along with a thought-provoking analysis of the strategic nature of oil resources. Supported by tools including frameworks, scenario analysis, derivative term sheets and visual aids like payoff profiles and market curves, commodity hedgers will be able to immediately apply the discussion on hedging instruments to the selection of hedge strategies, while understanding their main risks. Advanced practitioners in the derivatives market will appreciate the coverage of commodity price and volatility models, credit risk and associated CVA costs, and the nuances of risk-managing derivative transactions, illustrated using detailed examples and case studies describing real-world situations.\u003c\/p\u003e \u003cp\u003eThis practical guide will help you:\u003c\/p\u003e \u003cul\u003e \u003cli\u003eGain expert insight into all aspects of fuel hedging, price and volatility drivers and dynamics.\u003c\/li\u003e \u003cli\u003eDevelop a framework for financial risk analysis and the institution of hedge programs.\u003c\/li\u003e \u003cli\u003eNavigate volatile energy markets by employing effective risk management techniques.\u003c\/li\u003e \u003cli\u003eManage unwanted risks associated with commodity derivatives by understanding liquidity and credit risk calculations, exposure optimization techniques, credit charges such as CVA, DVA, FVA, etc.\u003c\/li\u003e \u003c\/ul\u003e \u003cp\u003e\u003cb\u003ePraise for \u003ci\u003eFuel Hedging and Risk Management\u003c\/i\u003e\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\"Risk Management is an art, not a science, but it certainly helps to know a lot of science. In this book, the authors provide an excellent overview of both qualitative and quantitative aspects of risk management and how to design and implement effective win-win fuel oil hedging strategies that will achieve the desired objectives under normal and extreme market conditions.\u003c\/p\u003e \u003cp\u003eIn addition to discussing key foundational issues, the book also discusses a framework to understand and manage hugely important second-order effects, such as credit risk or margin calls or asset-liability mismatches, which have the potential to turn a good idea into a bad outcome.\u003c\/p\u003e \u003cp\u003eA must read for anyone in the finance department of a corporate, trade house, or financial firm involved in fuel oil hedging.\"\u003cbr\u003e\u003cb\u003e—Diego Parrilla\u003c\/b\u003e, Former Global Head of Commodity Solutions and Head of Commodities, Bank of America\u003cb\u003e\u003cbr\u003e\u003cbr\u003e\u003c\/b\u003e\"This book provides highly useful insights into hedging and risk management methodologies, as well as theory, for the users of energy products. Dafir provides intuition stemming from not just top-tier commodity structuring expertise, but also broader insight from his earlier experience as a credit derivatives and exotics trader.\"\u003cbr\u003e\u003cb\u003e—Mitch Matharu\u003c\/b\u003e, former Head of Structuring, Merrill Lynch\u003c\/p\u003e \u003cp\u003e\"An Absolute Must Read. From the fundamentals of oil markets to the key points in negotiating a credit agreement and minimizing hedging costs, passing by the subtleties of implied volatility surface construction and its implications in derivatives pricing, this book offers you the indispensable practitioner's toolbox, useful whether you are a novice or a seasoned fuel trader.\"\u003cbr\u003e\u003cb\u003e—Frederic Cogny\u003c\/b\u003e, Global Head of Commodities Structured Products Trading, Standard Chartered Bank\u003c\/p\u003e \u003cp\u003e\"In this book, Dafir blends his deep knowledge of the commodity markets and the vagaries of the financial market with his incredible mathematical ability to explore fuel hedging in a manner accessible to Fuel Procurement Departments, CFOs and board members.\"\u003cbr\u003e—\u003cb\u003eMark Long\u003c\/b\u003e, Former Head and Managing Director of Merrill Lynch Commodities Asia\u003c\/p\u003e \u003cp\u003e\". . . This book is a hands-on guide for anyone interested in \"Fuel Hedging and Risk Management\", including lawyers involved in the execution of commodities hedging transactions and related ISDA and CSA negotiations.\"\u003cbr\u003e—\u003cb\u003eJustin Boyd\u003c\/b\u003e, Former Head of Financial Markets Legal, Standard Chartered Bank\u003c\/p\u003e","brand":"Wiley","offers":[{"title":"Default Title","offer_id":47989252096229,"sku":"NP9781119026723","price":100.0,"currency_code":"USD","in_stock":false}],"thumbnail_url":"\/\/cdn.shopify.com\/s\/files\/1\/1842\/7735\/files\/9781119026723.jpg?v=1761783385","url":"https:\/\/k12savings.com\/es\/products\/fuel-hedging-and-risk-management-isbn-9781119026723","provider":"K12savings","version":"1.0","type":"link"}