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Fr. 140.40
M Dafir, Mohamed Dafir, Mohamed Gajjala Dafir, S. Mohamed Dafir, S. Mohamed Gajjala Dafir, Simo Dafir...
Fuel Hedging and Risk Management - Strategies for Airlines, Shippers and Other Consumers
English · Hardback
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Description
A hands-on guide to navigating the new fuel markets
Fuel Hedging and Risk Management: Strategies for Airlines, Shippers and Other Consumers provides 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.
The 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.
This practical guide will help the reader:
* Gain expert insight into all aspects of fuel hedging, price and volatility drivers and dynamics.
* Develop a framework for financial risk analysis and hedge programs.
* Navigate volatile energy markets by employing effective risk management techniques.
* Manage unwanted risks associated with commodity derivatives by understanding liquidity and credit risk calculations, exposure optimization techniques, credit charges such as CVA, DVA, FVA, etc.
Praise for Fuel Hedging and Risk Management
"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.
In 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.
A must read for anyone in the finance department of a corporate, trade house, or financial firm involved in fuel oil hedging."
--Diego Parrilla, Former Global Head of Commodity Solutions and Head of Commodities, Bank of America
"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."
--Mitch Matharu, former Head of Structuring, Merrill Lynch
"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."
--Frederic Cogny, Global Head of Commodities Structured Products Trading, Standard Chartered Bank
"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."
--Mark Long, Former Head and Managing Director of Merrill Lynch Commodities Asia
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List of contents
Preface xiii
Acknowledgments xix
About the Authors xxi
CHAPTER 1 Energy Commodities and Price Formation 1
Energy as a Strategic Resource 1
Energy as a Tradable Commodity 3
Energy Commodities 5
Crude Oil 5
Oil Products 8
Natural Gas 11
Coal 11
Price Drivers in Energy Markets 12
Geopolitical Risks 12
The Geopolitical Chessboard - The Petrodollar System and Rising China 12
Long-Term Supply and Demand 15
Short-Term Supply and Demand: Supply Chain and Infrastructure 17
Financialization of Commodities 19
Market-Specific Price Drivers 19
Summary 20
CHAPTER 2 Major Energy Consumers and the Rationale for Fuel Hedging 23
Energy Market Participants 23
Risks Faced by Fuel Consumers - The Case of the Airline Industry 27
Airline Industry - Metrics and Operational Risks 27
Airline Industry - Financial Risks 30
Risks Faced by Other Major Fuel Consumers 35
Shipping Companies 35
Land Transportation 37
Oil Refining, Petrochemicals, and Power Generation 37
Industrial Users of Energy Commodities 38
The Case for Hedging 39
The Effect of Hedging on Airline Stock Price Volatility 39
Commodity Derivative Markets 41
A Brief History of Commodity Markets 42
Commodity Spot Markets and the Need for Standardization 43
Forward Contracts 44
Futures Contracts 45
Option Contracts 50
Summary 53
Appendix A 54
CHAPTER 3 Developing Fuel Hedging Strategies 55
The Rationale for Commodity Hedging 55
Developing a Fuel Hedging Program 57
Risk Identification and Assessment 57
Types of Risk 58
Risk Identification 59
Forecasting Prices and Conducting Simulations 59
Articulating the Firm's Risk Appetite 60
Setting Objectives for Fuel Hedging and the Scope of Hedging 60
Identifying Risk Managers within the Organization 61
Determining the Scope of the Hedge Program 61
Implementation of Hedging 62
Selecting the Fuel Cost Management Method 62
Identifying the Underlying to Hedge with and Basis Risk 63
Quantity and Tenor of Hedging 66
Selection of Instruments for Hedging 67
Market Risk 68
Management of the Unwanted Risks of a Portfolio 68
Credit Risk 68
Liquidity Risk 69
Operational Risk 69
Legal and Reputational Risk 70
Monitoring and Calibration of the Hedging Program 70
Template for a Risk Management Policy 71
The Airline Industry - Trends in Fuel Risk Management 71
Magnitude of Fuel Price Risk 71
Underlyings and Hedging Instruments 73
Quantity and Tenor of Hedging 74
Recent Developments 75
Summary 75
CHAPTER 4 Shipping and Airlines - Basics of Fuel Hedging 77
Spot-Forward Relationships 77
Theories on the Shape of Forward Curves 78
Spot-Forward Relationships for Investment Assets 79
Spot-Forward Relationships for Commodities 80
Spot and Futures Volatility 81
Options 82
Call and Put Options 83
Put-Call Parity 84
Option-Based Hedging for a Shipping Company 85
Implied Volatility and the Black-Scholes Model 86
The Black-Scholes-Merton Model 88
Black's Model for Pricing Options on Futures Contracts 89
The Greeks 89
Delta 90
About the author
SIMO M. DAFIR 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.
VISHNU N. GAJJALA 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.
Summary
A hands-on guide to navigating the new fuel markets Fuel Hedging and Risk Management: Strategies for Airlines, Shippers and Other Consumers provides a clear and practical understanding of commodity price dynamics, key fuel hedging techniques, and risk management strategies for the corporate fuel consumer.
Product details
Authors | M Dafir, Mohamed Dafir, Mohamed Gajjala Dafir, S. Mohamed Dafir, S. Mohamed Gajjala Dafir, Simo Dafir, Simo M Dafir, Simo M. Dafir, Simo M. Gajjala Dafir, Vishnu N Gajjala, Vishnu N. Gajjala, Vishnu Nandan Gajjala, Simo M. Dafir |
Publisher | Wiley, John and Sons Ltd |
Languages | English |
Product format | Hardback |
Released | 01.04.2016 |
EAN | 9781119026723 |
ISBN | 978-1-119-02672-3 |
No. of pages | 320 |
Series |
Wiley Finance The Wiley Finance Series Wiley Finance The Wiley Finance Series |
Subjects |
Social sciences, law, business
> Business
> Business administration
Finanzwesen, Allg. Finanz- u. Anlagewesen, Finance & Investments, Finanz- u. Anlagewesen |
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