Commodities and Commodity Derivatives: Modeling and Pricing for Agriculturals, Metals and Energy

I came to this book via a somewhat circuitous path. I was researching the use of Fast Fourier Transforms in computational finance and came to this paper: Option Valuation Using the Fast Fourier Transform (Carr, Madan 1999). That led to something called the Variance Gamma distribution. More recent papers yielded references to the CGMY model, where C is Carr, M is Madan, G is Hélyette Geman and Y is Marc Yor. And that led to Geman and this book.Despite those heavy academic origins, the book is well-written and should be accessible to practitioners in trading system design. It's especially comprehensive in its description of energy trading. There's an entire chapter on Monte Carlo and analytic solutions for pricing Asian, barrier and quanto options, for example. Oil, gas, electricity and even coal and weather markets are covered. The book does not, for the most part, talk about financial derviatives - options and futures traded on stock indexes, currencies or interest rates.

Two aspects of Prof. Geman's book are immediately distinguishing: it is quantitative and it is not propaganda. You won't read about how you can make millions trading commodities NOW! in this book; you will read about some of the quirks of these markets and how those quirks an affects the modeling.Equally important is that I found the book eminently readable. As one reviewer noted, there are occasionally clumsy phrases that read like transliterated French; however, I preferred Geman's chapters to those written by "guest authors." Overall, the tone and order of exposition are so engaging that I read the book completely (instead of skimming or reading only for needed information).The only suggestion I would make is to also purchase Dunsby et al.'s book on commodities; the two are great complements.

The text contains a very readable and intuitive introduction to Brownian motion in the context of pricing commodity derivatives. (The exception is Ito's Lemma, which is simply dropped into the reader's lap without any background or any motivation; see Wiersma's book on Brownian motion for both.) Prof. Geman does an exemplary job of comparing and contrasting the foundations of option pricing for equity options versus commodity derivatives. The last part of the book is a very good (albeit now somewhat dated) introduction the major commodities markets (ag, metals, oil & gas, and electricity). Particularly useful are the explications of the idiosyncracies of each market and why option pricing techniques and instruments will or will not work. A reader with 2 semesters of calculus and a background in standard probability theory (discrete and continuous) should have no problem with the mathematical formalism of the first six chapters. Alternately, read Hull or Choudhry's encyclopedic tome on the bond and money markets for a solid foundation.

it is a good book for introduction to different type of commodities. However it is not a good book on modelling derivatives.

The authority on commodity derviatives. If you trade derivs in commodity markets, you (should) have heard of this book and would highly recommend. You should also look at Espen Gaarder Haug's "The Complete Guide to Option Pricing Formulas" if for the only reason that it includes a computer CD w/ excel spreadsheets and VBA code for all the pricing models he discusses, which is the same and more that Geman covers. Geman does a great job of explaining the options market, volatility, downsides of black-scholes. My favorite explanations were those on the greeks: I think the most clear and concise (as possible) explanations you'll find anywhere.

an incredible reach book on the theoretical framework of derivatives pricing on commmodities as well as many specific fundamental aspects of agricultural, metal and energy. a beautiful blend of technical and fundamental topics on commodities. experienced derivatives people who encounter commoditiy derivatives the first time will be excited reading even the fundamentals of commoditiy derivatives since those basics are exciting to read and rich in challenges not known in financial derivatives. no wonder Nassim Taleb wrote the foreword, this is one of the most exciting derivatives books available!

I strongly recommend this book to anyone interested in the commodities market. Geman writes cogently and minimizes mathematical abstractions to bare necessity. Having read many a text book in my day, I can say this is one of the best.

Great book for an intro

The product arrived in good conditions (is new as was showed in the pictures). I collected it this morning from Australia Post.Thank you very much.

Very good book for those not familiar with the subject. However it does not really go far in terms of modelling.

Den folgenden Teil zur Autorin habe ich aus meiner anderen Rezension kopiert//////////////////////////////////////////////////////////////////////////////////////////////////////////////////Helyette Geman weiss bescheid! Einen PhD in Mathematik, einen PhD in Finanzwissenschaften und ein Diplom in theoretischer Physik. Sie war Head of R&D bei Caisse Depot (so ne Art Landesbank für Erwachsene). Das "G" im in der Praxis beliebten CGMY Optionspreismodell steht für ihren Nachnahmen (Peter Carr,Helyette Geman, Dilip Madan und Marc Yor). Die gut Frau war und ist Beraterin großer Player im weltweiten real commdities Geschäft./////////////////////////////////////////////////////////////////////////////////////////////////////////////////Neben Energy and Power Risk Management: New Developments in Modeling, Pricing, and Hedging (Wiley Finance) und Modeling and Forecasting Electricity Loads and Prices: A Statistical Approach (Wiley Finance) im Bereich Energy und The Handbook of Commodity Investing (Frank J. Fabozzi) zu Commodities im Allgemeinen das Beste was ich zum Thema je gelesen habe.Die ersten 7 Kapitel sind eine Einführung in die stochastische Modellierung und Bepreisung der Commodity Derivative im allgemeinen. Kapitel zwei befasst sich mit Gleichgewichtsmodellen, von deren Nutzen und Anwendbarkeit nicht so überzeugt bin. Alle Kapitel mit guter weiterführender Literatur. Gewisse Grundlagen im Bereich SDE/PDE und der Methodik zur Bepreisung von Derivaten wird vorausgesetzt. Also keine Einführung in das Thema. Wenn dieses Wissen vorhanden ist, ist das Buch IMHO aber leicht verständlich geschrieben.Die restlichen Kapitel sind sehr kompakte Einführungen in die einzelnen Märkte (Oil,NatGas, Metals, Agriculturals, Elictricity...sieh Inhaltsverzeichniss). Normen, Marktplätze, Spezifizierungen, etwas Geschichte,etwas zur Technik (fand ich insbesonder bei Electricity und NatGas interessant) und ein paar Zahlen (Verbrauc, Lagerkapazität, gehandeltes Volumen...) .....Sicher nicht alles was man wissen muss, aber eine äußerst kompakte und schöne Einführung.Nicht zwingend für Anfänger geeignet. Wenig bis gar keine Sache zur numerischen Implementierung und EDV Komponente. Aber rundum ein gutes Paket trotz des hohen Preises IMHO sehr empfehlenswert.

This book starts with the necessary financial background to understand commodities and commodity markets. It then goes into detail of what features all or most commodities share, then looks at the specifics of the different commodity assets, as well as covering issues like index investing. I've read it cover to cover, and go back to it whenever I want a refresher on a particular topic. It usually has what I'm looking for.Other commodity books go into more depth, but often they get bogged down in tedious detail. This book doesn't.

This book has helped my career as a commodity quant developer enormously.