The monumental events of the first half of 2011 have impacted the way derivatives are traded. The Arab Spring, the Japanese earthquake and tsunami, the debt crisis in Europe, and the US debt ceiling debate and its subsequent historic credit downgrading all monumental events on their own, have converged to produce a different landscape in which large commodity derivative positions are, quite simply, out of favour, writes Elise Coroneos.
However, while many of the larger, more traditional
players are taking smaller positions, the volatility in
commodities has brought to the market a slew of new entrants
attracted by the opportunities presented, and creating a
pressing and increased need for hedging instruments.
and new entrants
According to Oscar Bleetstein, head
of commodity investor sales for the Americas at Credit Suisse,
macro-economic uncertainty and "fat tail risk" has caused many
commodity hedge funds to reduce the size of their OTC energy
positions. We are seeing the over the counter volume come
off a little bit because people dont want to take more
than a certain defined amount of risk on their portfolio,
says Bleetstein, who works with large institutional
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