Quantitative Analysis

Quantitative Analysis

Representative Services

Case Studies

Risk Profile and Hedge Strategy Development

A large global holding company with significant generation assets in North America was interested in understanding how to transition from long-term fixed price power sales to a managed, merchant approach.  This required analysis to demonstrate how changes to the existing sales strategies could impact expected revenues in future years.  The analysis included simulating thousands of iterations of forward electricity prices at locations across the United States.  The different price environments were used to development of the company’s risk profile, a probabilistic view of future electricity revenues.  Leveraging the risk profile, a hedge strategy analysis was developed to evaluate how different hedging strategies were effective in producing revenue outcomes consistent with the organization’s risk appetite. 

Potential Future Exposure and Liquidity Modeling

A global refining company was working to establish an internal trading operation to replace the outsourced model they had used for many years.  One of the key steps in accomplishing this was to establish the amount of capital required to support the level of trading and to ensure that appropriate access to liquidity and lines of credit were established to support the margin calls that would inevitably occur.  This was achieved through the development of an analysis to quantify the financial and liquidity impacts of the combination of physical and financial trading planned by the front office.  A Potential Future Exposure (“PFE”) model was developed to quantify the peak exposure that could be expected as well as the potential day-over-day, week-over-week and month-over-month changes in margin requirements.  This allowed the treasury organization to make decisions on how best to manage the margin calls.