Transcript Explanation Credit Reducing Trades

Example Credit Reducing Trades
Click your mouse to start the animated presentation
(you only have to click once).
The presentation runs approx. 3 minutes
Credding @ 2011
Credding owns the copyright in this presentation. Reproduction of this Credding presentation
is authorized, provided the source is acknowledged.
Example Credit Reducing Trades
Counterparty B:
Credit exposure:
Profit
= EUR 0
Your company = EUR 0
And counterparty B sold these to
Net position = 0 MWh
Counterparty A = EUR 0
counterparty A @ EUR 60/MWh
Counterparty A
Counterparty A:
Counterparty B
Trading
trades
result,
Summer
Result
German
net2010:
2010
positions
Power and
Example
(with a market price of EUR 60/MWh)
exposures
are equal
0
The following
OTCwith
deals
weretoexecuted
forindependently
all counterparties
Profit
= EUR 0
Your company bought
Net position = 0 MWh
Sold these
to counterparty B
Your company:
EUR* 60/MWh
Profit
=@
43.800
(60-60)
5 MW Baseload Cal 2013
counterparty A
Creditfrom
exposure:
Your company
EUR 0
@ EUR= 60/MWh
= EUR 0
Net position = 0 MWh
Counterparty B = EUR 0
Credit exposure:
Your company
Counterparty A = EUR 0
Counterparty B = EUR 0
Example Credit Reducing Trades
Counterparty B:
Profit
= EUR 0
Net position = 0 MWh
Credit exposure:
Your company = EUR 1.095.000
Counterparty A = - EUR 1.095.000
Counterparty A
Counterparty A:
Profit
= EUR 0
Net position = 0 MWh
Counterparty B
Trading
Credit exposure
resultsIn
and
can
net
bepositions
reduced are
by
2011
executing
unaffected,
a credit
Credit
exposures
Reducing
Trade
have
the
market price
rises
to EUR 85/MWh
increased
considerably
It works
This results
as
follows….
in:
Your company:
Profit
= 43.800 * (60-60)
Credit exposure:
Your company = - EUR 1.095.000
Counterparty B = EUR 1.095.000
= EUR 0
Net position = 0 MWh
Credit exposure
Your company
Counterparty A = EUR 1.095.000
Counterparty B = - EUR 1.095.000
Example Credit Reducing Trades
Counterparty B:
Credit exposure:
Profit
= EUR 0
Your company = EUR 0
And counterparty A sells these
Net position = 0 MWh
Counterparty A = EUR 0
to counterparty B @ EUR 60/MWh
Counterparty A
Counterparty B
TheThis
trading
Execute
Credit
Result
results
Reducing
aafter
trilateral
and
executing
net
Trade
deal
positions
between
offsets
the are
theleft
unharmed
your
MtM
Credit
company,
and
and
Reducing
exposed
the credit
counterparty
Trade:
volumes
exposures
A
(with a market price of EUR 85/MWh)
are
of
and
completely
thecounterparty
original
mitigated
deals
B
Counterparty A:
Profit
= EUR 0
sells these
Net position And
= 0 MWh
Your company buys
Your company: 5 MW Cal 2013
Profit
= 43.800 * (60-60)
from counterparty B
= EUR 0
@ EUR 60/MWh
to counterparty A
Credit exposure:
@ EUR 60/MWh
Your company = EUR 0
Counterparty B = EUR 0
Net position = 0 MWh
Credit exposure:
Your company
Counterparty A = EUR 0
Counterparty B = EUR 0
Example Credit Reducing Trades
Credit Reducing Trades:
…are an effective and efficient tool to mitigate credit risk exposures
…are beneficiary for all credit exposures (Volumes and/or MtM) due to
trading in standardized OTC commodities
…enable commodity trading companies to increase trading liquidity
…enable commodity trading companies to actually reduce credit exposures
and/or to reduce market price sensitivity
…enable commodity trading companies to reduce delivery and
settlement risks as well
Credding provides a web portal which helps commodity trading companies to
identify and facilitate Credit Reducing Trades efficiently.
Would you like to know more about Credit Reducing
Trades or the services of Credding?
Please contact Credding at [email protected]
www.credding.com
Credding is established in the Netherlands and is registered by the Dutch
Authority for the Financial Markets (AFM)