Hedge Revaluation

• Hedge Revaluation
• • Context
  • Purpose and Scope
  • Hedge Revaluation Streams
  • Hedge Revaluation Results
  • Automation

Context

Hedging operations reduce the risk associated with prices determined by a quotation on the relevant commodity market at a predefined quotation period (QP) in the future, and not at the time the contract is signed or the material is shipped. A hedge position is an order given to a broker or counter-party to buy or sell a number of contracts in a commodity market.

Valuations and settlements are created to determine the margin price of a hedge action; and therefore, its profit or loss. Valuations for options contracts also provide information needed to make a decision about whether to execute or withdraw the options contract.

Valuations and settlements can be created via the Hedging Explorer, but only for a single hedge position at a time. A hedge revaluation can create valuations and settlements for multiple hedge positions.

Purpose and Scope

The purposes of the hedge revaluation are to:

• Calculate valuations or settlements for all open positions that match the parameters of the hedge revaluation
• Execute options contracts that are 'in the money' on the declaration date, if automatic execution is specified for the applicable settlement method

Open positions are hedge positions:

• That are locked
• With a transaction date that is before or equal to the revaluation date
• Without a final settlement

A hedge revaluation can include both hedge positions for physical commodities and foreign exchange (FX) hedge positions for currency commodities.

Hedge Revaluation Streams

A hedge revaluation stream is effectively a template that is used to create a hedge revaluation. The default parameter settings in the template are inherited by the hedge revaluations created in that stream.

Hedge Revaluation Results

The hedge revaluation can create valuations and settlements for hedge positions.

• A settlement is created for a futures, spread or swaps contract if the hedge revaluation date is on or after the hedge position's maturity date and all required prices are available.
• A settlement is created for an options contract if the hedge revaluation date is on or after the hedge position's declaration date.
• If the criteria for a settlement are not met, a valuation is created.

The Hedging Explorer also displays valuations and settlements that are created by hedge revaluations.

If the settlement method configuration includes Automatic Execution, an options contract is automatically executed if:

• The hedge revaluation is run with the same date as the declaration date of the options contract.
• A settlement is possible (rather than a valuation).
• The settlement created by the hedge revaluation is in the money or at the money.

Automation

Hedge revaluations can be created and run on an automatic schedule. Multiple schedules can be configured for each hedge revaluation stream.

A scheduled hedge revaluation can run even if the previous hedge revaluation is unlocked.

MineMarket can send an email alert if a scheduled hedge revaluation has an error, either in calculations or in locking. The configuration for these email alerts is per hedge revaluation stream. Email alerts are not sent for errors in hedge revaluations that are run manually.