8582The Dealers Book

The dealer's book is the record of all cash market positions and associated futures hedges. Dates of futures and cash positions never exactly match, but they are usually close enough so that liquidity is not a problem. Positions in distant months, which are less liquid, are later switched to more active positions in near months, and as distant months become near as time goes by, their positions in near months are switched as they expire. Because futures and cash are not perfectly matched, a gap exposure is always present. Often, dealers manage this risk by using other hedges. Rebalancing the book transfers excess risk from the intermediaries. The dealer's book may be thought of as a dynamic document that is actively managed and continually modified to meet changing market conditions.

Companies active in the physical and paper markets are often comfortable running unbalanced books because they are capable of supplying the underlying physical commodity. And since most electricity deals are still physical, some paper players are inactive at present. Banks are now more likely to run unbalanced books due to increased liquidity in the markets. The book gradually increases in size as more commodity-indexed business is added. Swap transactions add complexity and result in more active trading because such arrangements are for longer time periods, use more financial tools, and are customized to each client's needs. For these reasons, swaps can require higher transaction fees than futures trading, although replication of transactions and increased underwriting competition are driving down the costs to participants.

Solar Stirling Engine Basics Explained

Solar Stirling Engine Basics Explained

The solar Stirling engine is progressively becoming a viable alternative to solar panels for its higher efficiency. Stirling engines might be the best way to harvest the power provided by the sun. This is an easy-to-understand explanation of how Stirling engines work, the different types, and why they are more efficient than steam engines.

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