Fuel Hedging And Risk Management - Strategies For Airlines, Shippers And Other Consumers

Fuel Hedging and Risk Management: Strategies for Airlines, Shippers and Other Consumersprovides a clear and practical understanding of commodity price dynamics, key fuel hedging techniques, and risk management strategies for the corporate fuel consumer. It covers the commodity markets and derivative instruments in a manner accessible to corporate treasurers, financial officers, risk managers, commodity traders, structurers, as well as quantitative professionals dealing in the energy markets.

With the regime changes and elevated volatility observed in commodity prices over the last decade, fuel consumers are increasingly vulnerable to price shocks. The airline and shipping industries in particular have seen major structural and operational changes, with financial risk management superseding operational management in determining profitability. This book aims to present practical hedging solutions for managing fuel price risks while developing a holistic understanding of the risk management process, starting from hedge programme development and derivative structuring to financing, risk measurement and credit exposure management.

The book includes a wide variety of key topics, including a discussion of commodities and derivatives markets, financial risk analysis of commodity consumers, hedge programme design and implementation, vanilla hedging, and exotic hedging products. Advanced topics covered include commodity price and volatility models, the impact of model choice on exotic derivatives pricing and risk management, as well as credit risk in commodity derivatives transactions and associated CVA costs. The book is unique in providing intuitive guidance on understanding forward curve dynamics and volatility term structure evolution for commodities. It also helps link hedging-related decisions to the financing strategy of a firm, offering integrated solutions that exploit synergies available through bundling. Fully up-to-date and relevant, this useful guide gives you the information you need to successfully deal with volatile fuel prices.

The book illustrates the use of derivatives in real-world situations to manage commodity price risk with the help of term-sheets, payoff profiles, and scenario analysis. Comprehensive case studies illustrate the hedging process from conception to execution and monitoring of hedges in diverse situations, including hedge-portfolio restructuring and bundled financing, and hedging. Readers of this book can expect to:

• Develop a good understanding of fuel markets, derivatives market conventions, and popular hedge structures.
• Gain expert insight into all aspects of fuel hedging, price and volatility drivers, and dynamics
• Learn how to navigate energy prices and guard against volatility by employing effective risk management techniques
• Manage credit risk associated with commodity derivatives by understanding credit risk calculations, exposure optimization techniques, credit charges, such as CVA, DVA etc.

SIMO MOHAMED DAFIR is a Managing Director at Volguard, a financial consulting firm specializing in Capital Markets, Wealth Management and Derivatives. He has over fourteen years of experience during which he has held senior positions in a number of major international banks in Hong Kong and Singapore. He was the Regional Head of Commodity Structuring at Standard Chartered Bank, Head of Commodity Exotics and Hybrids at Merrill Lynch Asia, and Trader of Credit Derivatives at Credit Suisse. He is also Professor of Global Financial Markets at Sorbonne Assas International Law School and an expert witness for financial markets litigations. Dafir started his career in Aerospace and Telecom at the European Space Agency and Alcatel. He holds an MBA from INSEAD, a Post Graduate Research Degree from the National Polytechnic Institute of Toulouse, an MSc in Automation from ENSEEIHT and a Bachelor's degree in Mathematics.

VISHNU N. GAJJALA is a commodity derivatives expert at Volguard, where he oversees the financial market analytics business. He has held positions in commodities structuring and sales at institutions including Standard Chartered Bank and Merrill Lynch, where he developed customized strategies for commodity hedgers and investors, including airlines, mining companies, trading houses, private banks and sovereign wealth funds. He holds a Bachelor's degree in Electrical Engineering from IIT Madras and an MBA from IIM Bangalore. Vishnu currently resides in Singapore.