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The EIA on financial markets and crude oil prices
The US Energy Information Administration (EIA) has gone live with a new set of pages on “What Drives Crude Oil Prices.” Of course, supply and demand factors are front and center. But what’s new is the...
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The cost and value of variability in electricity generation
The Bloomberg terminal offers an LCOE function provided by its New Energy Finance unit. The function calculates the levelized cost of electricity for a number of generation technologies. The LCOE is...
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Is that a fat tail I see?
One side effect of the financial crisis is a much wider familiarity with the wonky lexicon of risk management, which is generally a good thing. But it has its drawbacks. Once a person has learned to...
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Duality and Uncertainty: Lessons from the carbon market
The Great Recession has hit the European carbon market hard. With output down, the demand for allowances is down, and so is the price. As recently as the start of this year, emissions allowances were...
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Reading the Term Structure of Futures Prices
Over the last few years, natural gas prices in the U.S. have been pounded by a variety of factors. Front and center are the continuing breakthroughs in horizontal drilling and hydraulic fracturing. On...
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Delta’s Refinery Gambit: It’s Not About Volatility
Delta Airlines’ deal to buy the Trainer Refinery owned by Phillips66 was formally announced yesterday. The 8K filing is available here and includes the press release and slide show. Until yesterday the...
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No pain, no gain?
The Missing Risk Premium takes aim at a central premise of modern finance theory: extra return requires extra risk. The premise is so central that few of us involved in modern academic finance can...
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Reading the Term Structure
Natural gas prices have been rising recently. But I always like to look at the whole term structure of futures prices to get a better sense of what is really going on. My colleagues at CRA, Billy...
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Crude oil basis risk is receding… for now.
Companies that hedge oil prices have been forced to reevaluate their strategies over the last couple of years. Many companies have used the NYMEX WTI contract, one of the oldest energy futures...
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Dumbing down
John Kay’s column in the Financial Times yesterday uses the episode with the Swiss franc as a reminder about model risk.
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