What hedge funds need to know about energy derivatives
Energy markets are becoming ever more popular for hedge funds as exchanges offer energy trading and talented managers become available. However, pitfalls remain and attention to a number of details is vital
The number of hedge funds trading energy has skyrocketed in the past 12 months. Two primary reasons lie behind this trend.
The first is the exodus of many electric utilities from energy trading, making it possible for hedge funds to recruit top trading talent. The advent of clearing mechanisms for over-the-counter (OTC) energy contracts is the second factor.
Having a credit line with a market-maker is no longer a prerequisite to trade OTC energy contracts. Traders can now use an exchange to clear
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