Insposure supports trading and non-trading companies in optimizing (commodity) exposures with the ultimate goal to increase grip on profitability. This is achieved by approaching all different types of exposures as parts of one dynamic portfolio, producing a tailor-made solution to manage that portfolio. Market risks will decrease without an organizational overhaul or large software implications.
Gaining insight and getting to the bottom of your true market exposures is most important: Insposure evaluates all contractual purchases, sales, production capacity, commitments and flexibility to reveal all possible (market price) sensitivities. After assessing all exposures in your company, we will address them as one dynamic portfolio.
All different types of exposures are treated as parts of one grand portfolio which forms the core of the margins of your business. By addressing all exposures as such will give you a bird’s eye view on risks. This approach acknowledges all market price risks, existing hedges and embedded and real options. Furthermore diversification effects between departments are taken into account.
Once the portfolio is constructed, the net positions will be compared and aligned to the company-wide risk tolerance. The alignment is performed with the appropriate tools, ranging from modifications in new contracts to financial hedge products. This approach will result in total control of exposures, more stable and predictable margins and grip on profitability.
Insposure has vast experience in integrating embedded and real options in complex portfolios.
Embedded options are features that are woven into contracts, which can be extracted and treated as ‘normal’ financial options. It is very convenient and useful to extract these options from the contracts for valuation and measurement (exposure) purposes. Embedded options often come in the form of caps and floors within floating price contracts.
Real options are forms of flexibility that many companies have within their means of production or investments. For example the flexibility to whether or not develop an oil field is amongst others dependent on the forward oil price. Treating this kind of flexibility as a ‘normal’ financial option will directly lead to an exposure which can be managed and optimized.