The CTRM Blog

Michael Coleman, CEO of Hyper Rig, sees lots of opportunity for his company as trading firms try to get a better grip on their businesses with an eye on forthcoming and new regulation. “The banks are way ahead of energy firms such as large utilities in their thinking about risk management and are pushing towards intra-day risk reporting.” he told me this morning. “On the other hand, many large utilities would like to get to better than monthly risk reporting.” Coleman sees that many larger trading firms are hindered by their portfolio of systems which lack the scalability and processing power to provide the business with the numbers they need on demand and those systems, he says, are very often bottlenecks that provide an added set of operational risks to be managed. No where is that more apparent than at utilities and producers where CTRM solutions often lack the sophisticated asset models they require forcing them to run those models off system which, in turn, increases the problem of aggregating risks across the business.

CommodityPoint has issued a new Technical Briefing Note on Risk Optimization highlighting the Hyper Rig Risk Optimiser product. The TBN may be downloaded from the Reports and Articles page of this blog.

In an ideal world, running stochastic risk metrics such as full blown Monte Carlo Value at Risk (VaR), Earnings at Risk (EaR), portfolio stress tests or, other simulations, would be performed both on demand and in real time for complex commodity portfolios. Unfortunately however, this vision has proven to be elusive with most firms resorting to the use of overnight ‘batch’ jobs lasting hours to provide an accurate assessment of the day’s starting position and then utilizing parametric risk metrics during the trading day to approximate changes in position.

Next week I will be heading back to London to be a panelist at Hyper Rig’s breakfast briefing on Risk Optimization. I will be joined by Richard Jefferson, MD Head Commodities Sales at Deutsche Bank and Michael Coleman founder of Hyper Rig as we discuss the issues facing traders and risk managers.

The breakfast briefing will help attendees discover the latest technological advances to:

* Run full Monte Carlo and other simulations in real-time, on demand, on complex portfolios during the day without the need to replace other systems or use overnight batch jobs;