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Books > Business & Economics > Finance & accounting > Finance > Investment & securities > Commodities
Commodity markets present several challenges for quantitative
modeling. These include high volatilities, small sample data sets,
and physical, operational complexity. In addition, the set of
traded products in commodity markets is more limited than in
financial or equity markets, making value extraction through
trading more difficult. These facts make it very easy for modeling
efforts to run into serious problems, as many models are very
sensitive to noise and hence can easily fail in practice. Modeling
and Valuation of Energy Structures is a comprehensive guide to
quantitative and statistical approaches that have been successfully
employed in support of trading operations, reflecting the author's
17 years of experience as a front-office 'quant'. The major theme
of the book is that simpler is usually better, a message that is
drawn out through the reality of incomplete markets, small samples,
and informational constraints. The necessary mathematical tools for
understanding these issues are thoroughly developed, with many
techniques (analytical, econometric, and numerical) collected in a
single volume for the first time. A particular emphasis is placed
on the central role that the underlying market resolution plays in
valuation. Examples are provided to illustrate that robust,
approximate valuations are to be preferred to overly ambitious
attempts at detailed qualitative modeling.
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