Market prices
A Price Index is a normalized average of spot (cash) prices in a decentralized commercial market at a certain time, independently researched and reported by a specialized information provider.
One’s Actual Prices may differ from Price Indexes because larger customers (orders) usually trade below the average market price while smaller customers (orders) usually trade above it.
What is important for hedging is correlation between Actual Prices and a relevant Price Index, not their exact match.
There is no need to use Price Indexes in related supply contracts. Your regular commercial terms may remain intact.
Basis risk
Unless Price Index is used in your supply contract, its change over time may differ from the change of Actual Price. The more they correlate, the lower such “basis” risk.
A 100% correlation between hedged Actual Price and Price Index eliminates both market and basis risks. This is unnecessary for hedging: removing most market risk (typically over 95%) is better than assuming it all unabated.
To reduce basis risk, forward contracts should use Price Indexes providing the highest correlations with hedged prices.
The platform helps analyze historical correlations with dozens of Price Indexes in major currencies without disclosing sensitive commercial data.
Pricing corridors
These provide flexibility that was previously available only through options hedging—at no extra or hidden cost.
You may increase pricing corridors for more latitude, or reduce down to zero for precision.
Symmetric
Zero
Users’ orders scan forward markets to lock in manufacturing, recycling, mining, trading margins when feasible.
Spread orders go one step further, replicating key elements of your supply chain (for example, spreads between prices of raw materials and finished products).
Manage costs
A simple example:
A timeline example:
Scroll right for solution.
If plans change, a contract that is no longer required may be fully or partially offset by an opposite trade.
Manage sales
A simple example:
A timeline example:
Scroll right for solution.
If plans change, a contract that is no longer required may be fully or partially offset by an opposite trade.
Protect margins
A simple example:
A timeline example:
Scroll right for solution.
If plans change, a contract that is no longer required may be fully or partially offset by an opposite trade.
A picture tells a thousand words. Some say our demo tells a million.
A picture tells a thousand words. Some say our demo tells a million.
