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PORTFOLIO AND ASSET VALUATION
Many "industry standard" pricing models make a number
of simplifying assumptions about how prices behave in real world
markets. A number of these unrealistic shortcuts can result in significant
valuation errors.
Properly designing and calibrating custom valuation models can
provide your firm with a real competitive advantage. We apply a
leading edge valuation framework to a wide range of trading instruments,
derivatives, and physical assets. Special attention is devoted to
the risks - as well as the opportunities - associated with "real"
and contractually embedded options.
We are also available on short notice to provide an impartial "second
opinion" on the value and risk implication of significant transactions your firm may be considering.
Click here to view a sample of Portfolio and Asset Valuation articles authored by BSRA
| Sample Project - Natural
Gas Pipeline Valuation
A natural gas utility was disappointed in the returns that
it was receiving from brokering excess pipeline capacity.
Its traditional counterparties were all bidding below fair
market value, and expected the utility to grant a number of
volumetric swing rights as well.
Using a "real" option modeling approach, we showed
that the position was worth significantly more than the current
bids.
In order to capture this additional value, we suggested that
the utility manage the risk associated with the physical and
financial components separately. This process - called risk
decomposition - resulted in a decision to hedge the option
portion of the exposure with a financially settled contract.
A bank with a AA+ credit rating, which did not trade in the
physical market, was willing to pay an attractive price for
these contracts.
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Other sample projects: Valuation of Interest Rate Derivatives portfolio for top-3 Mortgage Bank in the United States. Valuation of Energy and Commodity Derivatives transactions for some of the largest energy and commodity trading firms worldwide.
For more information, please contact us at services@blackswanrisk.com.
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