Commodity Derivatives
Markets and Applications
Published on 9. November 2007
Book
Hardback
336 pages
978-0-470-01910-8 (ISBN)
Description
In Commodity Derivatives: Markets and Applications, Neil Schofield provides a complete and accessible reference for anyone working in, or studying commodity markets and their associated derivatives. Dealing primarily with over the counter structures, the book provides extensive coverage of both hard and soft commodities, including gold, crude oil, electricity, plastics, emissions and agriculturals.
Using structures unique to the individual market, each chapter includes an explanation of the commodity and an analysis of its physical market, discussion on the typical patterns of demand and supply and the main factors that will influence the price of the commodity, and the main products.
Each chapter focuses on how the products could be used along the physical supply chain and seeks to identify the main market risks and how they can be hedged. The book then brings into perspective how the structuring banks hedge their own resultant exposure and examines the attraction of OTC investment structures for the wholesale market.
Commodity Derivatives: Markets and Applications is essential reading for those wishing to learn about the main features of the commodity markets, the mechanics of derivatives, and how they are applied.
Using structures unique to the individual market, each chapter includes an explanation of the commodity and an analysis of its physical market, discussion on the typical patterns of demand and supply and the main factors that will influence the price of the commodity, and the main products.
Each chapter focuses on how the products could be used along the physical supply chain and seeks to identify the main market risks and how they can be hedged. The book then brings into perspective how the structuring banks hedge their own resultant exposure and examines the attraction of OTC investment structures for the wholesale market.
Commodity Derivatives: Markets and Applications is essential reading for those wishing to learn about the main features of the commodity markets, the mechanics of derivatives, and how they are applied.
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Person
Neil C. Schofield is currently the head of Financial Markets Training at Barclays Capital, where he has global responsibility for all aspects of the bank's product-related training. As part of the job, he regularly delivers training on a wide range of subjects in commodities, fixed income, equity, foreign exchange and credit.
Prior to joining Barclays, he was a director at Chisholm Roth, a financial training company, where he delivered seminars to a blue-chip client base around the world. He has also worked in a training capacity for Chase Manhattan bank from 1988 to 1997. The author was appointed as a visiting fellow at ICMA Centre, Reading University, England in April 2007.
Prior to joining Barclays, he was a director at Chisholm Roth, a financial training company, where he delivered seminars to a blue-chip client base around the world. He has also worked in a training capacity for Chase Manhattan bank from 1988 to 1997. The author was appointed as a visiting fellow at ICMA Centre, Reading University, England in April 2007.
Content
Preface.
Acknowledgements.
About the Author.
1 An Introduction to Derivative Products.
1.1 Forwards and futures.
1.2 Swaps.
1.3 Options.
1.4 Derivative pricing.
1.5 The spot-forward relationship.
1.6 The spot-forward-swap relationship.
1.7 The spot-forward-option relationship.
1.8 Put-call parity: a key relationship.
1.9 Sources of value in a hedge.
1.10 Measures of option risk management.
2 Risk Management.
2.1 Categories of risk.
2.2 Commodity market participants: the time dimension.
2.3 Hedging corporate risk exposures.
2.4 A framework for analysing corporate risk.
2.5 Bank risk management.
2.6 Hedging customer exposures.
2.7 View-driven exposures.
3 Gold.
3.1 The market for gold.
3.2 Gold price drivers.
3.3 The gold leasing market.
3.4 Applications of derivatives.
4 Base Metals.
4.1 Base metal production.
4.2 Aluminium.
4.3 Copper.
4.4 London metal exchange.
4.5 Price drivers.
4.6 Structure of market prices.
4.7 Applications of derivatives.
4.8 Forward purchase.
4.9 Vanilla option strategies.
4.10 Structured option solutions.
5 Crude Oil.
5.1 The value of crude oil.
5.2 An overview of the physical supply chain.
5.3 Refining crude oil.
5.4 The demand and supply for crude oil.
5.5 Price drivers.
5.6 The price of crude oil.
5.7 Trading crude oil and refined products.
5.8 Managing price risk along the supply chain.
6 Natural Gas.
6.1 How natural gas is formed.
6.2 Measuring natural gas.
6.3 The physical supply chain.
6.4 Deregulation and re-regulation.
6.5 The demand and supply for gas.
6.6 Gas price drivers.
6.7 Trading physical natural gas.
6.8 Natural gas derivatives.
7 Electricity.
7.1 What is electricity?
7.2 The physical supply chain.
7.3 Price drivers of electricity.
7.4 Trading electricity.
7.5 Nord pool.
7.6 United states of america.
7.7 United kingdom.
7.8 Electricity derivatives.
8 Plastics.
8.1 The chemistry of plastic.
8.2 The production of plastic.
8.3 Monomer production.
8.4 Polymerisation.
8.5 Applications of plastics.
8.6 Summary of the plastics supply chain.
8.7 Plastic price drivers.
8.8 Applications of derivatives.
8.9 Roles of the futures exchange.
8.10 Option strategies.
9 Coal.
9.1 The basics of coal.
9.2 The demand for and supply of coal.
9.3 Physical supply chain.
9.4 The price of coal.
9.5 Factors affecting the price of coal.
9.6 Coal derivatives.
10 Emissions Trading.
10.1 The science of global warming.
10.2 The consequences of global warming.
10.3 The argument against climate change.
10.4 History of human action against climate change.
10.5 Price drivers for emissions markets.
10.6 The EU emissions trading scheme.
10.7 Emission derivatives.
11 Agricultural Commodities and Biofuels.
11.1 Agricultural markets.
11.2 Ethanol.
11.3 Price drivers.
11.4 Exchange-traded agricultural and ethanol derivatives.
11.5 Over-the-counter agricultural derivatives.
12 Commodities Within an Investment Portfolio.
12.1 Investor profile.
12.2 Benefits of commodities within a portfolio.
12.3 Methods of investing in commodities.
12.4 Commodity indices.
12.5 Total return swaps.
12.6 Structured investments.
12.7 Analysing investment structures.
Glossary.
Notes.
Bibliography.
Index.
Acknowledgements.
About the Author.
1 An Introduction to Derivative Products.
1.1 Forwards and futures.
1.2 Swaps.
1.3 Options.
1.4 Derivative pricing.
1.5 The spot-forward relationship.
1.6 The spot-forward-swap relationship.
1.7 The spot-forward-option relationship.
1.8 Put-call parity: a key relationship.
1.9 Sources of value in a hedge.
1.10 Measures of option risk management.
2 Risk Management.
2.1 Categories of risk.
2.2 Commodity market participants: the time dimension.
2.3 Hedging corporate risk exposures.
2.4 A framework for analysing corporate risk.
2.5 Bank risk management.
2.6 Hedging customer exposures.
2.7 View-driven exposures.
3 Gold.
3.1 The market for gold.
3.2 Gold price drivers.
3.3 The gold leasing market.
3.4 Applications of derivatives.
4 Base Metals.
4.1 Base metal production.
4.2 Aluminium.
4.3 Copper.
4.4 London metal exchange.
4.5 Price drivers.
4.6 Structure of market prices.
4.7 Applications of derivatives.
4.8 Forward purchase.
4.9 Vanilla option strategies.
4.10 Structured option solutions.
5 Crude Oil.
5.1 The value of crude oil.
5.2 An overview of the physical supply chain.
5.3 Refining crude oil.
5.4 The demand and supply for crude oil.
5.5 Price drivers.
5.6 The price of crude oil.
5.7 Trading crude oil and refined products.
5.8 Managing price risk along the supply chain.
6 Natural Gas.
6.1 How natural gas is formed.
6.2 Measuring natural gas.
6.3 The physical supply chain.
6.4 Deregulation and re-regulation.
6.5 The demand and supply for gas.
6.6 Gas price drivers.
6.7 Trading physical natural gas.
6.8 Natural gas derivatives.
7 Electricity.
7.1 What is electricity?
7.2 The physical supply chain.
7.3 Price drivers of electricity.
7.4 Trading electricity.
7.5 Nord pool.
7.6 United states of america.
7.7 United kingdom.
7.8 Electricity derivatives.
8 Plastics.
8.1 The chemistry of plastic.
8.2 The production of plastic.
8.3 Monomer production.
8.4 Polymerisation.
8.5 Applications of plastics.
8.6 Summary of the plastics supply chain.
8.7 Plastic price drivers.
8.8 Applications of derivatives.
8.9 Roles of the futures exchange.
8.10 Option strategies.
9 Coal.
9.1 The basics of coal.
9.2 The demand for and supply of coal.
9.3 Physical supply chain.
9.4 The price of coal.
9.5 Factors affecting the price of coal.
9.6 Coal derivatives.
10 Emissions Trading.
10.1 The science of global warming.
10.2 The consequences of global warming.
10.3 The argument against climate change.
10.4 History of human action against climate change.
10.5 Price drivers for emissions markets.
10.6 The EU emissions trading scheme.
10.7 Emission derivatives.
11 Agricultural Commodities and Biofuels.
11.1 Agricultural markets.
11.2 Ethanol.
11.3 Price drivers.
11.4 Exchange-traded agricultural and ethanol derivatives.
11.5 Over-the-counter agricultural derivatives.
12 Commodities Within an Investment Portfolio.
12.1 Investor profile.
12.2 Benefits of commodities within a portfolio.
12.3 Methods of investing in commodities.
12.4 Commodity indices.
12.5 Total return swaps.
12.6 Structured investments.
12.7 Analysing investment structures.
Glossary.
Notes.
Bibliography.
Index.