Natural Gas Swap Agreement

CélinePILON > Natural Gas Swap Agreement
Non classé / 28 septembre 2021 / Posted by celine

It is a sequel to A Primer on Hedging Natural Gas Costs. As stated in the previous contribution, fixed forwards, swaps, options and futures are among the various instruments that allow large natural gas consumers to cover the costs of natural gas. Let`s see how this swap would affect your natural gas costs in January if the price of the January Fixed Price Natural Gas Exchange Algonquin City Gates rises and falls between now and the end of December, when the swap expires. In an earlier lesson and in the textbook, we discussed the fact that physical companies wishing to hedge themselves must adopt a position in the financial market that is the opposite of their physical position. For example, a crude oil producer is « long » the raw material. Therefore, to ensure adequate coverage, they must be « short » in the financial derivative they have chosen.