GLOBAL VALUATION MADE EASY

Valuation in Multiple Currencies

Challenge

Global trading organizations need more accurate portfolio exposure calculations which require data from P&L reports, margin settlements, and other accelerated market sources. Their FX team also experience challenges to hedging FX risk. To improve performance and information on exposure these organizations require more comprehensive data than what their ETRM platform could provide out of the box.

We highlight the challenges faced by a global trading house that wanted to change the methodology to calculate the portfolio exposures from one currency to another which was not offered by their current ETRM.

Incorrect
P&L

Real organization wide portfolio exposures were delayed.

Inaccurate Margin Settlements

Back office was inefficently calculating the Margin settlements.

Lack of real market exposure visibility

Delayed real-time portfolio exposures visibility

Poor FX
Hedging

FX Team had challenges to hedging FX risk

Calculating your Portfolio Exposure

The energy industry is experiencing a rapid transformation with North America, Europe and Asia evolving as an interconnected global Energy market. Commodity prices are tying major global energy participants to each other with the European and the Middle Eastern trading hubs being heavily correlated. However, as volatility is still common in the energy markets companies are now also dealing with a different set of risks.

Value Creed’s team has helped one of their global energy trading houses to overcome this challenge by understanding their current business process, analysing the implementation of their trading business in their ETRM system and then tweaking it to deliver the desired outcome.

Current and expected results

To expand, this global trading house needed more accurate portfolio exposure calculations requiring data from P&L reports, margin settlements, and accelerated market visibility. The FX team also experienced challenges to hedging FX risk. To improve performance and information on exposure, the firm needed more comprehensive data than the ETRM platform could provide out of the box.

Click to Enlarge >

If you observe the above the case there is a 1.1k approx USD exposure difference

The correct portfolio exposure would be if the ETRM calculates the exposures From the Deal currency (149,905 GBP) to the Business function currency – GBP/EUR(176,887.9 EUR) and then to reporting & compliance currency – EUR/USD (189,270.05 USD)

Click to Enlarge >

If you observe the above the case there is a 1.1k approx USD exposure difference

Solution

Value Creed implemented a solution on top of their existing ETRM valuation engine to accept multiple currencies to value the portfolio, new rules for the exposure calculations, stored the results and displayed the new real portfolio value.

Deal Capture
in ETRM

System
Configuration

Custom
Valuation Engine

New Portfolio
Calculation

Outcomes

The real insights gave power to the business to plan an action and know when to implement it.

Real Portfolio
Visibility

The implemented solution gave the trading desk real visibility of their portfolio exposures.

Adequate Risk Management

The implemented solution helped the Derivatives and FX team to create more sophisticated hedging strategies.

Real visibility for Accounting and Compliance

They were able to report the correct P&L by entities and eliminate the FX differences.

Recommended Resources

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Enhanced Efficiency in Precision Trading: Price Comparison & Ad hoc Comparison Tools

Enhanced Efficiency in Precision Trading Using Price Comparison & Ad hoc Comparison Tools

A Deep Dive into Bloomberg Integration with Value Creed

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Valuation in Multiple Currencies

Challenge​

Incorrect P&L

Inaccurate Margin Settlements

Lack of real market exposure visibility

Poor FX Hedging

Calculating your Portfolio Exposure

Current and expected results

Click to Enlarge >

Click to Enlarge >

Solution

Outcomes

Real Portfolio Visibility

Adequate Risk Management

Real visibility for Accounting and Compliance

Recommended Resources

Ready to get started?

Challenge

Incorrect
P&L

Poor FX
Hedging

Real Portfolio
Visibility