Virtual Barrels

Preface
Contents
1: Introduction
	1.1 The Ecosystem of Real Options
	1.2 The Structure of the Book
	Reference
Part I: Economic Foundations, Markets, and Participants
	2: Oil, Money, and Yields
		2.1 Commodities and Money
		2.2 The Oil Own Rate of Interest
		2.3 Carry and Convenience Yield
		2.4 The Roll Yield
		References
	3: Fundamentals, Storage, and the Model of the Squeeze
		3.1 The Invisible Hand of Storage Boundaries
		3.2 The Canonical Theory of Storage
		3.3 A Stylized Model of the Squeeze
		3.4 Cushing: Pipeline Crossroads of the World
		3.5 Negative Oil Prices
		References
	4: Financialization and the Theory of Hedging Pressure
		4.1 The Theory of Normal Backwardation
		4.2 The Hedging Equilibrium
		4.3 The Genesis of Oil Financialization
		4.4 Inflation Hedging and Risk Parity
		4.5 Inconvenience Yield, or the Theory of Normal Contango
		References
Part II: Quantitative Futures Strategies
	5: Systematic Risk Premia Strategies
		5.1 The Evolution of Algos
		5.2 Myths and Realities of Oil Momentum
		5.3 Carry as a Transmitter of Fundamentals to Prices
		5.4 Value and Mean-Reversion
		5.5 The Reaction Function
		References
	6: Quantamentals
		6.1 Trading Curve and Convexity
		6.2 Time Spreads and Inventories
		6.3 WTI-Brent Accordion
		6.4 Cointegration and Energy Stat-Arb
		6.5 Disentangling Flows and Positioning
		References
	7: Macro Trading
		7.1 Dynamic Systems and Feedback Loops
		7.2 Oil, Dollar, and Commodity Terms of Trade Strategies
		7.3 Oil and Energy Equities
		7.4 Oil and Inflation
		7.5 Macro Fair-Value Model
Part III: Volatility Trading
	8: Options and Volatilities
		8.1 Options and ``Théorie de la Spéculation´´
		8.2 Local Volatility and Diffusions
		8.3 Delta Hedging and Option Replication
		8.4 Realized Volatility
		8.5 Implied Volatility and its Skew
		References
	9: The Hidden Power of Negative Gamma
		9.1 Options and Insurance
		9.2 The Most Powerful Option Greek
		9.3 The Smile of the Volatility Risk Premium
		9.4 The Art and Science of Delta Hedging
		9.5 The Behavior of Hedgers and Regime Changes
		References
	10: Volatility Smile Trading
		10.1 Producer Hedging and Volatility Market-Making
		10.2 Skew Delta and Two Types of Stickiness
		10.3 When Black Smirks, Bachelier Smiles
		10.4 Fat Tails and the Quadratic Normal Model
		References
Part IV: Over-the-Counter Options
	11: Volatility Term Structure and Exotic Options
		11.1 Dark Pools and the Hacienda Hedge
		11.2 The Term Structure of Implied and Local Volatilities
		11.3 Volatility Discount from Price Averaging
		11.4 Early Expiry Options and Swaptions
		11.5 Multi-Factor Models and Other Exotics
		References
	12: Volatility Arbitrage and Model Calibration
		12.1 The Inverse Problem of Option Pricing
		12.2 Bootstrapping in Time
		12.3 Market-Implied Probability Distribution
		12.4 Local Volatility Smile
		References
	13: Spread Options and Virtual Storage
		13.1 The Synthetic Storage Strategy
		13.2 Triangular Correlation Arbitrage
		13.3 The Dichotomy of Spread Option Pricing
		13.4 Dealing with Unobservables
		References
	14: Epilogue
		14.1 The Roadmap for Energy Transition and Virtual Commodities
Appendix A: Diffusions and Probabilities
Appendix B: Option Pricing under Normal and Lognormal Distributions
Appendix C: The Perturbation Method and the Quadratic Normal Model
Appendix D: Option Pricing with Time-Dependent Volatility
Appendix E: Average Price Options
Appendix F: The Inverse Diffusion Problem
Glossary
References
Index