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Valuation in Multiple Currencies

We highlight how a global trading house wanted to change the methodology to calculate the portfolio exposures from one currency to another that was offered by the standard ETRM.

CHALLENGE

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

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

SOLUTION AND OUTCOME

Value Creed implemented a solution on top of an 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.

The real insights give power to the business to plan an action and know when to implement it. The client has achieved:  

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.​
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