Continuing our blog series, “Powerful Reading,” our team of energy trading consultants at MidDel Consulting will be sharing some of their favorite books. These books have not only influenced them in the excellent work that they do for our clients as energy consultants, but have also helped them gain perspective on a variety of global issues as we continue to strive to build a culture of lifelong learning.
Today, we look at a book entitled: Energy Trading & Investing: Trading, Risk Management, and Structuring Deals in the Energy Markets – Davis W. Edwards (2010)
For anyone new to the energy trading arena or those on the periphery, this book introduces the reader to the basics of the energy markets, covering all related commodities. It describes the physical characteristics of moving oil, gas and electricity to end users as well as the interactions among different energy sources in times of crises. It then covers the types of transactions available to traders and offers guidance as to what strategies traders take in various situations. The author also explains, in not too technical terms, how statistics and statistical modeling are used by trading desks to make better informed decisions. He then moves on to describe how evolving energy sources are impacting the industry and trading opportunities, such as wind, solar, nuclear and LNG. Once trading strategies are put in place, middle office (risk management) personnel are typically required to monitor positions and report fluctuations back to the front office (trading personnel). The book describes how the middle office uses value at risk and other metrics to measure portfolio performance and the impact on a firm’s credit positions with counter parties.
This book does not dive very deep into any one topic, but provides high level, comprehensive coverage for a complex industry for those with no or little knowledge of the subject. New entrants to the business or those somewhat removed from front and middle office activities, such as accounting and finance personnel, will gain a greater appreciation for the work performed on the trade floor.
(This review is based on the 2010 release. An updated version was released in Feb 2017.)
Scott Pederson is a Certified Public Accountant and a Senior Consultant with MidDel Consulting. MidDel Consulting is a System Integrator and Professional Services firm specializing in services supporting the business systems for Front, Back and Mid-Office. MidDel has been in business for over 16 years, and our consultants, on average, bring over 25 years of senior level energy industry knowledge to our projects. We have deep relationships with our clients, often working with them for more than a decade. For more information, email us at firstname.lastname@example.org or call #952-500-9275.