Energy Derivatives: The Source of the Next Crisis?
The ICFAI Reader, Special Issue, ICFAI University Press, 2009
4 Pages Posted: 13 Oct 2009
Date Written: January 2009
World energy consumption is projected to expand by 50 percent from 2005 to 2030; the lack of sufficient investments to satisfy increasing demand negatively influences energy prices. Energy financial contracts, like derivatives, employed to hedge increasing costs and risks of the industry, exhibit amazing growth rates and returns in the absence of any control and monitoring. Two dangers should be addressed: mispricing and illiquidity of energy derivatives, because can have domino effects in the financial sector and in the entire economy.
Keywords: energy derivatives
JEL Classification: G15
Suggested Citation: Suggested Citation