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Price Risk

In: Understanding Risk Management and Hedging in Oil Trading

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  • Chris Heilpern

Abstract

In this chapter we will learn what price risk means and how prices going up and down can lead to losses in trading. The fundamental notions are about being long, being short, or being price neutral. You will meet your best friends for understanding price risk: Smiley Face and Frowny Face. Price risk is explored in depth through analysis of typical contract pricing including fixed price contracts and “floating” price contracts. We examine how positions and price risk change over time. Managing price risk is one of the most important tasks for a trader. In order to manage price risk, you first need to understand it. By the end of Chapter 5, the reader will be able to identify long, short, or neutral price positions.

Suggested Citation

  • Chris Heilpern, 2023. "Price Risk," Springer Books, in: Understanding Risk Management and Hedging in Oil Trading, chapter 0, pages 49-77, Springer.
    • Handle: RePEc:spr:sprchp:978-3-031-44465-4_5
    DOI: 10.1007/978-3-031-44465-4_5
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