Course 11 of 20 · LNG Desk Academy

Portfolio Hedging & Proxy Basis Risk

Stage C, Exposure, funding and hedging. Level 6 of 10.

Hedging a mapped exposure with the instruments that actually trade, and sizing the proxy basis risk left behind after the hedge.

115 chapters · 12 modules · every chapter one 8 to 10 minute explainer · builds on: Course 03, Course 09, Course 10

Enrol or enquire See the 115 chapters
How a chapter is sized

One chapter is one idea taken to the point of use

Each chapter is a single self-contained explainer of 8 to 10 narrated minutes, covering one idea to the point where you can use it.

Chapters run in order. Each one assumes only what the chapters before it taught, and capability belonging to a later course is named and deferred rather than half-covered.

Curriculum

12 modules · 115 chapters

Open any module for its full chapter list, in teaching order.

M0 The Hedge That Cannot Match the Exposure Ch 1-10
  1. Why an LNG Cargo Is Harder to Hedge Than It Looks
  2. The Proxy Hedge as the Normal Case
  3. A Gas Molecule Priced by a Barrel
  4. Reading the Exposure Map as a Hedging Instruction
  5. Four Reasons an LNG Hedge Never Fits
  6. What Residual Basis Actually Is
  7. The Honest Objective of a Proxy Hedge
  8. What an Unhedged Cargo Book Does to a Quarter
  9. Who Owns the Residual on an LNG Desk
  10. The Route This Material Takes
M1 What Actually Trades in LNG, and How Far Out Ch 11-20
  1. The Instruments a Cargo Desk Can Genuinely Transact
  2. The LNG Swap Settling Against a Spot Assessment
  3. The European Hub Contract as an LNG Hedge
  4. The Crude Marker Swap Used on a Gas Obligation
  5. Liquidity by Tenor, Mapped
  6. Bid-Offer Width as the Real Price of Cover
  7. Who Is on the Other Side of an LNG Hedge
  8. One Cargo, One Lot: The Granularity Problem
  9. Cleared, Bilateral or Broked
  10. Freight and Charter Exposure Named and Deferred
M2 Hedging an Oil-Indexed Obligation Ch 21-30
  1. The Slope Formula Seen as a Hedge Ratio
  2. Energy Units on One Leg, Barrels on the Other
  3. The Averaging Lag Between Oil Print and Gas Delivery
  4. Building the Oil Hedge Schedule from the Pricing Clause
  5. A Three-Month Lag Hedged Wrongly, Costed
  6. When the Oil Hedge Is the Only Honest Answer
  7. The Oil-Indexed Buyer Who Sells Into a Gas Market
  8. Hedging the Slope Itself When the Formula Is Reopened
  9. Fuel Oil, Gasoil and the Second-Order Oil Legs
  10. What the Oil Hedge Leaves Standing
M3 Hedging a Hub-Indexed Obligation Ch 31-39
  1. The Nearly-Perfect Hedge and Why It Still Is Not
  2. Assessment Window Against Delivery Window
  3. Half-Month and Balance-of-Month Assessments
  4. Hedging a Regasified Sale at a Pipeline Hub
  5. The Tender Price That No Instrument References
  6. Choosing the Reference Before Choosing the Size
  7. A Hub Hedge Sized and Placed, Worked
  8. When the Hub Hedge Beats the Index Match
  9. The Remainder After a Hub Hedge
M4 Cross-Hedging One Basin Against Another Ch 40-49
  1. Selling in Asia, Hedging in Europe
  2. The Basin Spread You Inherit by Hedging
  3. Choosing Between Two Imperfect Basins
  4. The Arbitrage Economics That Hold Two Basins Together
  5. When the Arbitrage Closes and the Hedge Decouples
  6. Hedging a North American Supply Cost
  7. Three Indices on One Cargo
  8. Currency Inside a Cross-Basin Hedge
  9. Calorific Difference Between the Two Legs
  10. The Remainder After a Cross-Basin Hedge
M5 Sizing the Proxy Basis Ch 50-59
  1. Proxy Basis Defined for a Cargo Book
  2. Assembling a Basis History Without a Quoted Basis
  3. The Basis Distribution and Its Fat Tail
  4. Sizing the Residual in Dollars per Cargo
  5. Sizing the Residual Across a Delivery Programme
  6. The Adjusted Ratio That Shrinks the Residual
  7. Why the Fitted Ratio Is Not the Answer
  8. Pricing the Residual Into the Cargo Margin
  9. A Residual Report a Cargo Book Can Use
  10. Deciding Which Basis to Keep and Which to Pay Away
M6 Correlation as an Assumption Ch 60-68
  1. The Assumption Hiding Inside Every Proxy
  2. Measuring Co-Movement Between Two LNG-Relevant Indices
  3. Correlation in Calm Markets and in Cold Winters
  4. The Decoupling Event and What It Costs
  5. Why Gas and Oil Stopped Agreeing
  6. Stressing the Proxy Rather Than the Price
  7. A Correlation Limit Expressed as a Position
  8. Signals That a Proxy Is Breaking
  9. Replacing a Proxy Mid-Life
M7 Hedging the Spread, Not the Legs Ch 69-77
  1. The Spread Is the Position
  2. Hedging a Basin Spread Directly
  3. When the Spread Trade Is Cheaper Than Two Legs
  4. The Oil-to-Gas Spread as a Hedgeable Object
  5. The Regasification Spread Inside a Delivered Sale
  6. Spread Hedging a Three-Legged Cargo Position
  7. What Breaks When Only One Leg Is Covered
  8. Spread Positions and the Margin They Attract
  9. A Spread Hedge Assembled and Judged
M8 Hedging a Quantity That May Move Ch 78-87
  1. The Cargo That Might Not Arrive Where It Was Sold
  2. Hedging Before the Destination Is Known
  3. The Split Hedge Across Two Destinations
  4. Rebalancing the Hedge When the Cargo Turns
  5. The Hedge Adjustment Cost a Diversion Carries
  6. Hedging a Volume Tolerance Band
  7. Hedging an Annual Programme With Unfixed Slots
  8. The Cancelled Cargo and the Orphaned Paper
  9. Over-Cover After a Downward Nomination
  10. The Volume the Counterparty Chooses, and the Cover That Cannot Follow
M9 Twenty Years of Contract Against Three Years of Market Ch 88-97
  1. The Tenor Gap Stated Plainly
  2. Which Years Are Hedgeable and Which Are Not
  3. Stacking a Long Obligation Into Near Months
  4. Hedging the Front, Accepting the Back
  5. The Long-Dated Dealer Quote and What It Hides
  6. Hedging a Term Obligation in Annual Layers
  7. Why a Twenty-Year Hedge Would Be a Twenty-Year Credit Decision
  8. The Price Review as the Real Long-Dated Hedge
  9. Natural Offset Between Term Purchase and Term Sale
  10. The Residual a Long Contract Must Simply Carry
M10 Rolling the Proxy and Paying for It Ch 98-106
  1. Why a Proxy Hedge Has to Be Rolled Repeatedly
  2. The Roll Cost of a Proxy, Decomposed
  3. Rolling When the Asian Curve Is in Contango
  4. Rolling Two Legs of a Spread on Different Dates
  5. The Crowded Roll in a Thin LNG Market
  6. The Cash a Correct Proxy Hedge Demands
  7. When the Proxy Moves Against You and the Physical Does Not
  8. Sizing the Hedge Programme to the Cash It Can Post
  9. Unwinding as Each Cargo Prices
M11 A Portfolio Hedged, and the Residual Stated Honestly Ch 107-115
  1. The Portfolio Case, Part One: Reading the Book
  2. The Portfolio Case, Part Two: Offsets Before Instruments
  3. The Portfolio Case, Part Three: Choosing Each Proxy
  4. The Portfolio Case, Part Four: A Quarter of Movement
  5. The Portfolio Case, Part Five: The Residual Stated
  6. Judging a Proxy Hedge by Its Inputs
  7. A Proxy Hedging Policy for a Cargo Book
  8. What Proxy Hedging Cannot Do
  9. Where the Hedged Book Goes Next

The brochure gives each of these 115 chapters a paragraph on what it covers and what you can do once you have worked through it.

This is course 11 of twenty

It stands alone, and it is also the entry point to the LNG Desk Academy pathway.

Enrol or enquire See the whole pathway