Energy Markets: Structured Transactions

Vincent Kaminski

This chapter will continue our coverage of energy-related instruments available in the marketplace. As with the instruments discussed in the previous chapter, those reviewed here can be used by individual and institutional investors to acquire an exposure to energy commodities in order to speculate or to invest (with the difference between the two objectives being usually somewhat fuzzy), or to hedge pre-existing risks. Structured transactions examined in this chapter differ in many important aspects from the simple instruments covered in Chapter 4. These differences include:

  • they usually represent a package (a portfolio) of the instruments covered in the previous chapter;

  • they offer exposure to multiple sources of risk by referencing prices of multiple commodities, or even non-energy-related prices or variables (exchange rates, interest rates, weather); and

  • they are often subject to rules and regulations applying to financial instruments, such as bonds and equities.

As in the previous chapter, we will seek to cover the instruments that do not require knowledge specific to a particular commodity. Subsequent chapters will offer examples of the

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