In US accounting terminology, a criteria that must be met in order to use hedge accounting for US financial reporting. This provision has at times proven problematic in the energy industry where partial hedges for such exposure components as basis risk are widely used. Under the rules FAS 133 when testing for hedge effectiveness, only interest rate exposures can be broken down into their component parts.
* see also Financial Accounting Standards Board Statement 133 (FAS 133)
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.
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