Document Type
Article
Rights
Available under a Creative Commons Attribution Non-Commercial Share Alike 4.0 International Licence
Disciplines
5.2 ECONOMICS AND BUSINESS
Abstract
Energy based assets are showing increased susceptibility to volatility arising out of geo-political, economic, climate and technological events. Given the economic importance of energy products, their market participants need to be able to access efficient strategies to effectively manage their exposures and reduce price risk. This chapter will outline the key futures based hedging approaches that have been developed for managing energy price risk and evaluate their effectiveness. A key element of this analysis will be the breadth of assets considered. These include Crude and Refined Oil products, Natural Gas, and wholesale Electricity markets. We find significant differences in the hedging effectiveness of the different energy markets. A key finding is that, that Natural Gas and particularly electricity futures are relatively ineffective as a risk management tool when compared with other energy assets.
DOI
https://doi.org/10.1142/9789813278387_0026
Recommended Citation
Hanly, J.A. (2020). Risk Management and Hedging Approaches in Energy Markets. Handbook of Energy Finance. March 2020, 651-667. DOI: 10.1142/9789813278387_0026
Publication Details
Handbook of Energy Finance. March 2020, 651-667.