Introduction
As with all other aspects of financial risk management, managing risk associated with energy markets is both an art and a science. Standard quantitative techniques and risk management practices are certainly applied, but the finer nuances of energy markets—from spikes in real-time electricity markets to price spreads between various grades of heavy fuel oil—make energy risk management a particularly interesting and at times challenging endeavor.
Energy use has been closely tied to economic growth since the industrial revolution when burning coal as a fuel to produce steam became common in England, eventually spreading across the globe. Although coal is still widely used in electricity production and ...
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