e·Price: Risk based Energy Pricing

Asset backed companies often face a critical challenge while pricing their products. Due to
their physical attributes, Generation and Sales contracts are non-standard and seldom is
there a liquid market to hedge such contracts back-to-back. Very often they have to be hedged
via a combination of standard market traded products. This disconnect between the market
and the physical side of operations, throws open significant risks to an organization. The
economics of asset management can be severely impacted, unless these contracts are hedged
effectively, and the risks are priced optimally.

To address this issue, we have developed e·Price, that brings a radically different approach to
pricing Energy contracts. It incorporates a unique Incremental VaR approach to price the
differential risk that the trading desk would accrue on adding a particular position to it's portfolio.

The salient features of this module include:

arrow Transparent Rule based pricing
arrow Extremely fast calculations. Enables quick response to market movements.
arrow Computes Offer Price based on:
  The load profile and the latest Forward Curve
  arrow Hedge Strategy and Market Liquidity
  arrow User defined choice on Financial or Physical hedging
  arrow Optimal Hedge corresponding to market liquidity
  arrow Structure Risk Premium based on Incremental VaR
  arrow Market Bid/Ask Spread of hedging instruments
  arrow Rating based Credit Risk Premium
arrow Calculates Price Formulae Index for extended offer validity
arrow Reports on Optimal Hedge Advice

e·Price also includes an optional add-in functionality for calculating the Flexibility Premium
for Take-or-pay contracts. This uses a Real Option Valuation algorithm for valuing the optionality inherent in such contracts.

e·Price can be implemented in a Service based architecture, wherein it can be integrated in a Pricing Portal, to offer web based services to Sales Agents and External customers.


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