A trader may exceed position limits set by the Commodity Futures Trading Commission (CFTC) if:
1) the transaction or position is a substitute for transactions in a physical marketing channel; it is an economically appropriate means of risk reduction;
2) it arises from the potential change in the value of assets, liabilities or services;
3) it reduces risks resulting from a swap that was executed opposite a counterparty for which the transaction would qualify as a bona fide hedging transaction under the first three criteria; or
4) it reduces risks resulting from a swap that satisfies the first three criteria.
* see also Dodd-Frank; EMIR threshold
Commodity trading and risk management is a subject that is necessarily complicated, and is becoming more so. The Energy Risk Glossary seeks to disentangle and clarify the jargon by providing definitions of commonly used energy and commodity market terms.
These include definitions related to a variety of underlying energy products, as well as technical terms about the many instruments and benchmarks used by energy market participants.
Many of the most recent terms to have been added to our glossary stem from the actions of regulators since the 2008 global financial crisis. The onset of rules, such as the US Dodd-Frank Act and European Market Infrastructure Regulation, has markedly increased the cost and complexity associated with commodity trading. Perhaps they have also increased the need for a handy reference guide such as this.
The glossary is extensively cross-referenced, making for easy and thorough searches. We hope you find the latest edition of the Energy Risk Glossary to be a useful resource.
More on Risk Management
Hedges required to lock in performance on constant currency terms impact product pricing
This study deliberates upon a proposed delta–gamma sensitivity analysis–extreme value theory (DGSA–EVT) model that focuses on the assessment of risk exposures represented by the value of valu...
Welcome to The Journal of Risk's Online Early Forum. Here you will find the latest peer reviewed, accepted papers before they are available in print. With Online Early publication, users can access...
Welcome to The Journal of Computational Finance's Online Early Forum. Here you will find the latest peer reviewed, accepted papers before they are available in print. With Online Early publication,...
Sign up for Risk.net email alerts
Port comments on how risk management will be affected by Uniper spin-off
Bonnefous defends investment in commodities amid market turbulence
Schulz speaks about threats and opportunities facing European utilities
Acer director talks about progress on Remit and power market coupling
There are no comments submitted yet. Do you have an interesting opinion? Then be the first to post a comment.