A kerosene swap is a financial derivative that allows market participants to exchange fixed price payments for floating kerosene prices, providing price risk management for this refined petroleum product. Kerosene serves multiple markets including aviation fuel (jet fuel), heating applications, and industrial uses, making price hedging important for various industry participants.

Kerosene swaps enable airlines, heating oil distributors, and industrial users to hedge price exposure without physical delivery requirements. These instruments reference regional benchmark prices and provide efficient risk transfer mechanisms. The swap market helps establish price discovery and liquidity for kerosene products across different regional markets and quality specifications.

Real-world example: A heating oil distributor enters a kerosene swap to pay $2.20 per gallon fixed while receiving floating New York Harbor kerosene prices, protecting profit margins during the upcoming winter heating season regardless of price volatility.