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Bridging the gas gap

Volatility in the natural gas markets shows no sign of any let-up, which means that managing basis risk at Henry Hub continues to spur demand for increasingly innovative derivatives products. Catherine Lacoursiere reports

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Managing the basis differential – the difference between the cash and futures price of natural gas that may reflect location or time differentials – at Henry Hub has been more challenging since volatility increased in 2000. The market has responded with a plethora of new exchange-traded and over-the-counter (OTC) products to meet demand for more precise and credit-backed hedges. Yet recent high price volatility is even testing the mettle of risk seekers.

Most recently, a sharp price movement

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