Measuring PFE

click one of the links below to read more about measuring PFE with energycredit.

• Scenario Generator
• Pricing Engine
• Netting Aggregator
• Pre-Deal Checker
• PFE Web Reports

Typical questions that can be answered by PFE measurements are:

• What is the maximum exposure for counterparty ABC for a user defined time period (with 95% confidence or user defined confidence interval)?
• When will the maximum exposure occur for counterparty ABC over the lifetime of the existing transactions?
• How will the exposure change if we put an ISDA agreement in place? Or a Master Netting Agreement in place?
• How will a new deal affect the overall exposure?
• Will I potentially have to post margin to a Counterparty?

Pricing engine

This is where all counterparty trade positions are valued using future prices for Mark-to-Market (MTM) and future interest rates for discounting. Future exchange rate scenarios are also employed to account for trades done in non-base currencies. energycredit Analytics handles conventional deals such as forward physicals and financial swaps. It also handles physical and financial options using the Black-Scholes model and taking into account exercisability based on future market conditions. Structured trades are valued based on components and time shifted to ensure correct pricing.

The deal valuator combines transactions with similar attributes (positions with similar time periods, same price curves, and netting agreement) into a single position, therefore minimising the calculation time.