We've learned that NYMEX energy contracts represent the actual right to buy or sell energy commodities. So, for the commercial market participants, these provide both a market for production and a source of supply. For instance,producers of natural gas, crude oil, or refined products such as heating oil and gasoline, can sell financial contracts, thus guaranteeing that they will have a firm market in the future at afixed price. Conversely, consumers of these same products can buy contractsto ensure that they will have a firm supply source in the future at a set price. Utilizing financial contracts to reduce price and/or commodity risk is known as "hedging." In this lesson, we will discover the ways in which commercial players in the energy industry use the financial markets for hedging their risks.
At the successful completion of this lesson, students should be able to:
This lesson will take us one week to complete. There are a number of required activities in this module. The chart below provides an overview of the activities for this lesson. For assignment details, refer to the location noted.
All assignments will be due Sunday, 11:59 p.m. Eastern Time.
REQUIREMENT | LOCATION | SUBMITTING YOUR WORK |
---|---|---|
Reading Assignment: Chapter 5 Errera& Brown | Errera & Brown | No submission |
Hedge Examples | Steps in a Financial Energy Hedge page | No submission |
Lesson Activity: Financial/Physical Price comparisons | Lesson Activity page | Submit through Canvas |
Lesson 9 Quiz: Hedge Problems Fundamental Factors (on-going) |
Summary and Final tasks page Summary and Final tasks page |
Submit through Canvas Submit through Canvas |
If you have any questions, please post them to our General Course Questions discussion forum (not e-mail), located under Modules in Canvas. The TA and I will check that discussion forum daily to respond. While you are there, feel free to post your own responses if you, too, are able to help out a classmate.