Includes bibliographical references and index.

Fundamentals of commodity spot and futures markets -- Equilibrium relationships between spot prices and forward prices -- Stochastic modelling of commodity price processes -- Plain-vanilla option pricing and hedging -- Risk-neutral valuation of plain-vanilla options -- Monte-Carlo simulations and analytical formulae for Asian, barrier, and quanto options -- Agricultural commodity markets -- The structure of metal markets and metal prices -- The oil market as a world market -- The gas market as the energy market of the next decades -- Spot and forward electricity markets -- Commodity swaptions, swing, and take-or-pay contracts and real options -- In the energy industry -- Coal, emissions, and weather -- Commodities as a new asset class.

Contents
Foreword by Nassim Taleb
Preface
Introduction
1 Fundamentals of Commodity Spot and Futures Markets: Instruments,
Exchanges and Strategies
1.1 The importance of commodity spot trading
1.2 Forward and future contracts
1.3 The actors in futures markets
1.4 The structure of futures markets
1.5 Shipping and freight: Spot and forward markets
1.6 Volume, liquidity and open interest in future markets
2 Equilibrium Relationships between Spot Prices and Forward Prices
2.1 Introduction
2.2 Theory of storage, inventory and convenience yield
2.3 Scarcity, reserves and price volatility
2.4 Futures prices and expectations of future spot prices
2.5 Spot-forward relationship in commodity markets under no arbitrage
2.6 Price of a future contract and market value of a futures position
2.7 Relationship between forward and futures prices
2.8 The benefits of indexes in commodity markets
3 Stochastic Modelling of Commodity Price Processes
3.1 Randomness and commodity prices
3.2 The distribution of commodity prices and their first four moments
3.3 The geometric Brownian motion as a central model in finance
3.4 Mean-reversion in financial modelling: From interest rates to commodities.
3.5 Introducing stochastic volatility and jumps in price trajectories
3.6 State variable models for commodity prices
3.7 Commodity forward curve dynamics
4 Plain-Vanilla Option Pricing and Hedging: From Stocks to Commodities
4.1 General definitions
4.2 Classical strategies involving European calls and puts
4.3 Put-call parity
4.4 Valuation of European calls: the Black-Scholes formula and the Greeks
4.5 Merton (1973) formula and its application to options on commodity spot prices
4.6 Options on commodity futures and Black (1976) formula
5 Risk-Neutral Valuation of Plain-Vanilla Options
5.1 Second proof of the Black-Scholes-Merton formula
5.2 Risk-neutral dynamics of commodity prices
5.3 Commodity futures dynamics under the pricing measure
5.4 Binomial trees and option pricing
5.5 Implied volatility in commodity options and inverse leverage effect
6 Monte-Carlo Simulations and Analytical formulae for Asian, Barrier and Quanto Options
6.1 Monte-Carlo methods for European options
6.2 Asian (arithmetic average) options as key instruments in commodity markets
6.3 Trading the shape of the forward curve through floating-strike Asian options
6.4 Barrier options
6.5 Commodity quanto options
7 Agricultural Commodity Markets
7.1 Introduction
7.2 The grain markets
7.3 Soft commodities: The examples of coffee and soybean
7.4 Citrus and orange juice
7.5 Livestock markets
8 The structure of metal markets and metal prices
8.1 Introduction
8.2 About metals
8.3 Overview of metal markets and their operation
8.4 Characterising general price movements
8.5 Characterizing metal price movements
8.6 Conclusion
9 The Oil Market as a World Market
9.1 Why oil is traded and its relationship with worldwide energy prices
9.2 Crude oil markets
9.3 Refined products markets
9.4 Conclusion
10 The Gas Market as the Energy Market of the next decades
10.1 The world gas outlook
10.2 The main gas producers
10.3 Gas spot markets
10.4 Natural gas futures and options
11 Spot and Forward Electricity Markets
11.1 Introduction
11.2 The structure of the electricity industry: From vertically integrated utilities to unbundling and restructured oligopolies
11.3 Spot power markets and the issues in market design
11.4 The adjustment market and reserves capacity
11.5 Electricity derivatives markets
11.6 Modelling electricity spot prices: From mean-reversion and jump diffusion to jump-reversion
12 Commodity Swaptions, Swing and Take-or-Pay Contracts and Real Options
in the Energy Industry. Examples
12.1 Commodity swaps and swaptions
12.2 Exchange options
12.3 Commodity spread options: The examples of darkspread and crackspread
12.4 Options involving optimal strategies: American, swing and take-or-pay contracts
12.5 Discounted cash flows versus real options for the valuation of physical assets: The examples of a gas-fired power plant and a gas storage facility
13 Coal, Emissions and Weather
13.1 The coal market
13.2 Emissions
13.3 Weather and commodities
14 Commodities as a New Asset Class
14.1 Introduction
14.2 The different ways of investing in commodities
14.3 Commodity indices and commodity-related funds
Glossary
References
Index