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Topic Review (Newest First)
31-10-2013 01:38 AM
titanium
Help!!! needed from Physical Commodities Product Controllers/Risk

Dear Messiah,

i need to understand the commodities product controller/risk role. Please help me out if you are from this field. Below are my queries. I know it's quite long, please help answer me as much as you can. Many thanks for your kind help.

Dear Flamer,
If you are not genuine in helping me, please do not post anything. thanks.

1) What's the PnL procedure for commodities and where the source price is from? How to construct the forward commodities curve to estimate market prices?

2) For back to back buy and sell transactions, is the PnL calculated by the estimated margin?

E.g Buy FOB and sell CIF, the estimated margin (sales price purchase price- freight- interest charges- insurance- documentation charges other costs) will be the PnL?

Is the margin further discounted to present terms?

E.g Margin of USD 100/mt is for Jan 2013 shipment so should be discounted 2 months to present value to calculate PnL?

3) How to account for the deterioration of goods or loss of goods both covered and not covered by insurance?

E.g Buy 10,000 mt store in warehouse. 1000mt quality deteriorate and cannot claim insurance

Do you MTM against 9000mt only after the loss is ascertained and the 1000mt loss deducted from the PnL?

If insurance is claimable, is there any difference?

4) For buy positions, is it MTM against origin price before shipment and against destination price after shipment?

5) Do you do PnL for each counterparty, assigning each counterparty a loss limit and stopping the trade with the particular counterparty when the loss has exceeded the limit.

6) For VAR calculations=> 95% confidence (1.645) * Price* Quantity* Daily Volatility* Defeasance Period (SQRT T)

How long do you use for the defeasance period? Do you set a limit for the defeasance period meaning that no position can be held longer than a certain tenure?

7) For processed/refined/blended products, how is the PnL calculated?

E.g for refined/processed products, a refining/processing spread is added to the raw material price and MTM against the finished product market price?

E.g for blended products, cost price is a percentage of the components of raw materials + blending spread and MTM against the finished product?

8) How do you account for the daily changes in PnL? What are the factors that can account for the change in the trading profit and loss due to market changes/change in estimated / actual economics?

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