Financial Markets for Commodities

Preface

This book was born out of two sets of courses that we were lucky to be able to conduct for quite a long time for very enthusiastic students. The first set of courses were meant for – and are still intended for – engineering students, most of whom do not work in the field of commodities but who still wish to understand the fundamental principles underlying the working of these markets. The second set of courses is meant for students of economics and engineering students who are specializing further, following their initial training, with a masters in economics of the environment, energy and transport.

The book that has resulted from these two sets of courses is, in fact, a summary that has been hugely augmented by the additional course material that we gradually developed. It consists of a very descriptive set of materials that aim to present the basic mechanisms of the financial commodity markets: forward markets, call options and swaps markets. These fundamental mechanisms are not very difficult to understand, however they still require a certain amount of effort in order for the reader to become familiar with them. Although we resort to a few simplifications, we present all the elements that are essential for a rigorous comprehension of the subject; in this sense, the book presents no impasse, and thus, the reader who has assimilated all the information we present can understand how the financial commodity markets function.

This book is also, partly, a work on economic ...