Commodity Option Pricing: A Practitioner's Guide

Glossary

AAU

 Assigned amount unit. Emissions allowance under Kyoto Protocol that permits the holder to emit one tonne of carbon dioxide into the atmosphere.

Act of God

 A natural disaster such as a flood, tornado, hurricane, earthquake etc.

Actuals

 Trade in the actual physical commodity, as opposed to trade in futures contracts or other speculative contracts.

Aframax

 Size categorisation for medium sized oil tankers, typically with capacity 75–120 kDWT which permits operation at most ports worldwide. The “AFRA” is an acronym for average freight rate assessment, not Africa.

American option

 An option that can be exercised at any point during its lifetime, up to and including the expiration date.

API

 American Petroleum Institute. Most commonly encountered with respect to API gravity.

API gravity

 A measure of density of oil. Intermediate density is approx 30–39 °API, heavy is less than ∼30 °, light is greater than ∼40 °.

API2, API3, API4

 All Publications Index coal contracts, e.g. #2 (for delivery cif to ARA), #4 (for shipment fob from RB, South Africa), #5 and #6 (for shipment fob from Newcastle, Australia), #8 (for delivery cfr to South China), and #10 (for shipment fob from Puerto Bolivar, Colombia). N.B. Not to be confused with the “American Petroleum Institute” acronym in this glossary.

APO

 Average price option. Also known as an Asian option.

ARA

 Amsterdam, Rotterdam or Antwerp. Permissible locations for delivery of API2 coal contracts.

ASCI

 Argus Sour Crude ...