## Detailed Glossary

A Detailed Glossary of Energy Trading terms for registered users

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### G

#### Gamma

Gamma is one of the market risk Greeks

It measures the sensitivity of the Delta to an underlier or market value

It is of use when the value of the Delta itself varies with the value of the underlier - the Delta being the ratio of the value of the trade or portfolio to the value of an underlier or market value

Detail

A Physical Forward has a delta of approximately one with respect to the physical underlier, that is the value of a trade increases by 1% for every 1% increase in the underlier

By contrast an Option may have a delta of anywhere between -1 and +1, and the delta is not constant

At an underlier price of $20/tonne an Option might have a delta of 0.1, but at$40/tonne the delta might be 0.5

Trades with deltas that are constant are called linear (if we were to plot a graph of value against underlier it would be a straight line, the slope is the delta)

Trades with deltas that change with the value of an underlier are called non-linear (if we were to plot a graph of value against underlier it would be not be straight - the gamma is the measure of curvature of the plot at a particular point on the graph)

As an analogy think of delta as speed, it is the ratio of distance to time. Gamma is acceleration, just knowing the speed of an object doesn't tell us whether it is braking hard, accelerating, or at uniform speed - for that we need the acceleration

Because gamma is the change in delta per unit change of price per unit volume of commodity and delta is dimensionless then Gamma has units of 1 / (Price/Volume) = Volume/Price, e.g. Therms/\$

Some ETRMs use the term Gamma for the change in Exposure per unit change of price per unit volume of commodity and get Volume / (Price/Volume) = Volume2/Price e.g. MWh2/€

 Keyword(s): gammas

#### General Ledger

A record of all financial transactions made by the company

Detail

Usually represented by computer software the general ledger is a record of all transactions made by the company

In the trading context transactions occur when any event occurs that may cause a transaction:

• A trade is revalued
• A trade delivers
• An invoice is raised or received
• A cash payment is made or received

Transactions are represented, in double entry book keeping, as debits on one or more accounts and credits on one or more account - the debits always matching the credits for a specific transaction

Being able to assign p&l and cash flow events to general ledger accounts is a critical part of any end to end trading system

#### Give Up

A give up is an OTC trade - usually a forward - given up to an Exchange for clearing

Detail

A give up may start life as an OTC bilateral trade which, by mutual agreement, is given up to an Exchange to take advantage of clearing

The give up may also be:

a brokered OTC Forward that is mutually given up for clearing

traded as an Exchange Derivative on a Broker platform, and automatically be given up for clearing

Giving up an OTC trade for clearing combines the flexibility of trading bilaterally or through a broker, with the risk-free credit benefits of cleared trades

 Keyword(s): given upgive upsgive-up

#### Greek

The Greeks are a set of Market Risk measures, using Greek (or Greek-like) letters to measure sensitivities of a trade or portfolio to the set of factors that affect the value of the trade or portfolio

Detail

For more detail see the individual glossary entries for:

If you remember your Greek from school you'll already have spotted that Vega is not a Greek letter at all, just a word beginning with "V" that sounds faintly like a Greek letter

 Keyword(s): Greeks