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Valuing Indexation Flexibilities in X-LNG
Check out the full detailed analysis here
What we analyzed
- Three comparable setups:
- Benchmark A: Henry Hub–indexed portfolio (no flex)
- Benchmark B: Brent‑indexed portfolio (no flex)
- Indexation‑Optionality Portfolio: right to settle each cargo on the more economic of the two index formulas
- Apples‑to‑apples calibration: At current forward curves the two benchmark portfolios are set to similar profitability, putting the option “at‑the‑money” so we isolate extrinsic value.
- Method:1,000 realistic simulations for Brent and HH; profit‑sensitivity surfaces map bi‑dimensional exposure and optimization logic.
Key takeaways
- Consistent structural edge: The flexible portfolio significantly outperforms both benchmarks by “arbitraging” between pricing regimes as markets move.
- Quantified performance: Across simulations, the Indexation‑Optionality Portfolio delivers mean profits of $0.52/MMBtu compared to the Brent-Benchmark Portfolio and $0.44/MMBtu compared to the HH-Benchmark Portfolio.
- Why it works: Optionality captures volatility and the asymmetric effects of different index formulas (e.g., a% HH + b vs. c% Brent), selecting the best settlement state‑by‑state.
- Practical insight: Sensitivity surfaces reveal where Brent vs. HH strength flips the optimal choice, guiding hedging and deal‑design.
Who benefits from this
- Traders: Turn price dispersion into P&L by dynamically settling on the advantaged index; use the surfaces to time hedges.
- Origination/Structuring: Price, design, and negotiate index‑switch rights; evidence‑based justification for premiums and triggers.
- Portfolio & Risk teams: Reduce concentration to a single index, monetize volatility, and stress‑test under alternative curve/volatility scenarios.
- Finance & Strategy: Support fair‑value assessments and capital allocation with simulation‑based distributions rather than point estimates.
Why it matters now
- Forward curves can make single‑index deals look equivalent today, but realized volatility creates material extrinsic value that standard benchmarking misses.
- The same framework extends to alternative formulas and additional indices, allowing tailored negotiation packs and risk overlays.
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Legal Notice
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Impressum
Angaben gemäß § 5 TMG
Calypso Ventures GmbH
Bismarckstraße 10/12
10625 Berlin
Handelsregister: HRB 239736 B
Amtsgericht Charlottenburg
Umsatzsteuer: DE342781749
Vertreten durch:
Michael Schach
Kontakt
Telefon: +49 30 41734423
E-Mail: [email protected]
Nutzungsvereinbarungen
Imprint
Disclosures according to German law § 5 TMG
Calypso Ventures GmbH
Bismarckstraße 10/12
10625 Berlin
Registered number: HRB 239736 B
Amtsgericht Charlottenburg (Germany)
VAT: DE342781749
Represented by:
Michael Schach
Contact
Phone: +49 30 41734423
E-Mail: [email protected]
User Agreements
Thank you for your registration!
Our team will review your details and reach about regarding your access to X-LNG.
Return to website
Oops! Something went wrong while submitting the form.
Join the Email List
Thank you for your registration!
Our team will review your details and reach about regarding your access to X-LNG.
Return to website
Oops! Something went wrong while submitting the form.
Thank you for your registration!
Our team will review your details and reach about regarding your access to X-LNG.
Return to website
Oops! Something went wrong while submitting the form.
Valuing Indexation Flexibilities in X-LNG
Check out the full detailed analysis here
What we analyzed
- Three comparable setups:
- Benchmark A: Henry Hub–indexed portfolio (no flex)
- Benchmark B: Brent‑indexed portfolio (no flex)
- Indexation‑Optionality Portfolio: right to settle each cargo on the more economic of the two index formulas
- Apples‑to‑apples calibration: At current forward curves the two benchmark portfolios are set to similar profitability, putting the option “at‑the‑money” so we isolate extrinsic value.
- Method:1,000 realistic simulations for Brent and HH; profit‑sensitivity surfaces map bi‑dimensional exposure and optimization logic.
Key takeaways
- Consistent structural edge: The flexible portfolio significantly outperforms both benchmarks by “arbitraging” between pricing regimes as markets move.
- Quantified performance: Across simulations, the Indexation‑Optionality Portfolio delivers mean profits of $0.52/MMBtu compared to the Brent-Benchmark Portfolio and $0.44/MMBtu compared to the HH-Benchmark Portfolio.
- Why it works: Optionality captures volatility and the asymmetric effects of different index formulas (e.g., a% HH + b vs. c% Brent), selecting the best settlement state‑by‑state.
- Practical insight: Sensitivity surfaces reveal where Brent vs. HH strength flips the optimal choice, guiding hedging and deal‑design.
Who benefits from this
- Traders: Turn price dispersion into P&L by dynamically settling on the advantaged index; use the surfaces to time hedges.
- Origination/Structuring: Price, design, and negotiate index‑switch rights; evidence‑based justification for premiums and triggers.
- Portfolio & Risk teams: Reduce concentration to a single index, monetize volatility, and stress‑test under alternative curve/volatility scenarios.
- Finance & Strategy: Support fair‑value assessments and capital allocation with simulation‑based distributions rather than point estimates.
Why it matters now
- Forward curves can make single‑index deals look equivalent today, but realized volatility creates material extrinsic value that standard benchmarking misses.
- The same framework extends to alternative formulas and additional indices, allowing tailored negotiation packs and risk overlays.
Join the Email List
Thank you for your registration!
Our team will review your details and reach about regarding your access to X-LNG.
Return to website
Oops! Something went wrong while submitting the form.
Legal Notice
Choose Language
Impressum
Angaben gemäß § 5 TMG
Calypso Ventures GmbH
Bismarckstraße 10/12
10625 Berlin
Handelsregister: HRB 239736 B
Amtsgericht Charlottenburg
Umsatzsteuer: DE342781749
Vertreten durch:
Michael Schach
Kontakt
Telefon: +49 30 41734423
E-Mail: [email protected]
Nutzungsvereinbarungen
Imprint
Disclosures according to German law § 5 TMG
Calypso Ventures GmbH
Bismarckstraße 10/12
10625 Berlin
Registered number: HRB 239736 B
Amtsgericht Charlottenburg (Germany)
VAT: DE342781749
Represented by:
Michael Schach
Contact
Phone: +49 30 41734423
E-Mail: [email protected]