Energy Trading and Risk Management

In the challenging world of energy trading, fortune favours the prepared. Whether one is brave enough (or not) comes second and not having a clear strategy would be borderline foolishness. Given such a backdrop, almost inevitably, there are resources aplenty targeting those who feel the need to be better informed and equipped. Among the latest reference sources, industry veteran and academic Dr Iris Marie Mack’s book Energy Trading and Risk Management published by Wiley is a pretty compelling one.

I instantly warmed up to the book barely a chapter in, struck by its practical approach, balanced tone, contextualised narrative and a genuine desire on the author’s part to define terms and methodologies for the benefit of those with a mid-tier investment knowledge base.

Furthermore, the instructive narrative seeks to bring about a holistic understanding of how energy markets work to begin with, leading on to an adequate treatment of risk, speculation and portfolio diversity tenets. The format in which ‘Energy Trading and Risk Management’ is minutely sub-sectioned point to point is simply splendid. So should you wish to salami slice and pick up bits of the subject, it would serve you just as well as a cover to cover read through.

Conversely, if you are confident enough to skip the basics and go straight through to concepts and formulas, the sequential flow of text in each chapter helps you breeze through basic definitions usually quoted in boxed text on to what you are after.

Accompanying the text are charts, case studies, background briefs, notes on macro drivers and definitions at various points split into ten weighty sub-sectioned chapters in a book of around 270 pages. From contango to the modern portfolio theory, from risk management in the renewables business to mitigation in an ever changing market climate - it’s all there and duly referenced.

While I appreciated Dr Mack’s work in its entirety, a chapter on exotic energy derivatives (which follows a passage on the plain vanilla variety) stood out for me. One would be happy to recommend this title to energy professionals, fellow energy analysts and those with a desire to pursue energy trading as a career pathway.

It would most definitely appeal to entrants finding their feet in the market as well as established participants wanting to refresh their thinking and methodologies. Ultimately, for every reader this title is bound to morph from being an informative and educational book at the point of first reading, to an invaluable reference source as and when subsequently needed. That makes it worthy of any energy sector professional’s bookshelf. Gaurav Sharma

IRIS MACK, PHD, EMBA, earned a Harvard doctorate in Applied Mathematics and a London Business School Sloan Fellow MBA. She is a former MIT professor and Derivatives Quant/Trader who has worked in financial institutions in the U.S., London, and Asia. She has also spent some of her professional career at NASA, Boeing, and AT&T Bell Laboratories – where she obtained a patent for research on optical fibers.

Dr. Mack lectures and consults on energy derivatives, quantitative finance, and high frequency trading, and serves on various boards, including National Academy of Sciences Transportation Research Board, AlgoAnalytics Trading and Financial Analytics (India), MarketExpress Financial News and Research (India), Women Mentor Women Foundation, and I Can Still Do That Foundation.

Dr. Mack founded Phat Math Inc. and The Global Energy Post in Miami, Florida. She and her colleagues at Phat Math launched their prototype mathematics edutainment social network PhatMath.com. Students in grades K-12 and college have access to free 24⁄7 online math homework help on PhatMath.com — named one of the Top 50 Social Sites for Educators and Academics and 25 Useful Networking Sites for Grad Students.