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Fuel Hedging and Risk Management: Strategies for Airlines, by Simo M. Dafir, Vishnu N. Gajjala

By Simo M. Dafir, Vishnu N. Gajjala

A hands-on advisor to navigating the recent gasoline markets

Fuel Hedging and danger administration: ideas for airways, Shippers and different shoppers provides a transparent and functional figuring out of commodity rate dynamics, key gas hedging suggestions, and possibility administration thoughts for the company gasoline buyer. It covers the commodity markets and spinoff tools in a way available to company treasurers, monetary officials, possibility managers, commodity investors, structurers, in addition to quantitative pros dealing within the strength markets.

The publication contains a big choice of key subject matters concerning commodities and derivatives markets, monetary chance research of commodity shoppers, hedge software layout and implementation, vanilla derivatives and unique hedging items. The publication is exclusive in supplying intuitive information on realizing the dynamics of ahead curves and volatility time period constitution for commodities, gas derivatives valuation and counterparty danger recommendations resembling CVA, DVA and FVA. absolutely updated and appropriate, this publication contains finished case stories that illustrate the hedging procedure from notion to execution and tracking of hedges in various situations.

This useful advisor can help the reader:

  • Gain specialist perception into all features of gasoline hedging, rate and volatility drivers and dynamics.
  • Develop a framework for monetary possibility research and hedge programs.
  • Navigate unstable strength markets by way of using potent hazard administration techniques.
  • Manage undesirable hazards linked to commodity derivatives by way of knowing liquidity and credits danger calculations, publicity optimization recommendations, credits fees similar to CVA, DVA, FVA, etc.

Praise for Fuel Hedging and hazard Management

"Risk administration is an paintings, now not a technological know-how, however it definitely is helping to understand loads of technological know-how. during this booklet, the authors supply a very good evaluate of either qualitative and quantitative facets of danger administration and the way to layout and implement potent win-win gasoline oil hedging ideas that might in achieving the specified targets below general and severe industry conditions.

In addition to discussing key foundational concerns, the e-book additionally discusses a framework to appreciate and deal with highly vital second-order results, reminiscent of credits probability or margin calls or asset-liability mismatches, that have the aptitude to show a good suggestion right into a undesirable outcome.

A needs to learn for a person within the finance division of a company, alternate condominium, or monetary company inquisitive about gasoline oil hedging."
—Diego Parrilla, Former worldwide Head of Commodity suggestions and Head of Commodities, financial institution of America

"This publication presents hugely valuable insights into hedging and hazard administration methodologies, in addition to idea, for the clients of power items. Dafir offers instinct stemming from not only top-tier commodity structuring services, but additionally broader perception from his past event as a credits derivatives and exotics trader."
—Mitch Matharu, former Head of Structuring, Merrill Lynch

"An Absolute needs to learn. From the basics of oil markets to the most important issues in negotiating a credits contract and minimizing hedging charges, passing by way of the subtleties of implied volatility floor development and its implications in derivatives pricing, this ebook will give you the integral practitioner's toolbox, helpful even if you're a amateur or a professional gasoline trader."
—Frederic Cogny, international Head of Commodities established items buying and selling, common Chartered Bank

"In this booklet, Dafir blends his deep wisdom of the commodity markets and the vagaries of the monetary industry together with his amazing mathematical skill to discover gas hedging in a fashion available to gas Procurement Departments, CFOs and board members."
Mark Long, Former Head and handling Director of Merrill Lynch Commodities Asia

". . . This ebook is a hands-on advisor for a person attracted to "Fuel Hedging and possibility Management", together with legal professionals fascinated about the execution of commodities hedging transactions and comparable ISDA and CSA negotiations."
Justin Boyd, Former Head of economic Markets felony, usual Chartered Bank

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Additional resources for Fuel Hedging and Risk Management: Strategies for Airlines, Shippers and Other Consumers

Example text

Market risk (the risk that market prices of inputs change). Credit risk (the risk that a customer or counterparty fails to pay or deliver contracted goods or services). Liquidity risk (an inability to purchase inputs at reference prices or an inability to secure financing for operations). Legal risk (risk due to uncertainty in rules or legal proceedings). Reputational risk (risk of events impacting the firm’s reputation). These risks can be broadly classified into two categories – those related to the specific product market in which the firm operates (operational or enterprise risk) and those related to financial markets (financial risk).

It is measured in centistokes or Saybolt universal seconds. The pour point is the lowest temperature at which the crude oil retains its flow characteristics and below which it turns semi-solid. These measures are essential to determine the means of storage and transportation for liquids. Volatility of crude oil and other products is measured using the Reid vapor pressure test and is important for handling and treatment considerations. Vapor pressure is especially important for gasoline as it affects starting, warm-up, and vapor locking tendency during use.

Together with Pakistan, China has been developing a megaproject called the China Pakistan Economic Corridor (CPEC) consisting of a network of highways, railways, and oil and gas pipelines over 3000 km running from the port of Gwadar all the way to Kashgar in China. The CPEC will give China access to the Arabian Sea not far from the Strait of Hormuz. Similarly, China gained access to the Bay of Bengal via Sino-Burma pipelines, which transport oil and gas from the port of Kyaukphyu to Kunming (Yunnan Province).

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