Markets / Natural Gas

Swing

 

Your Challenges

Choosing the optimal timing and quantity of gas to take under a swing contract

Valuing gas swing capacity or a gas swing asset

Understanding optimal physical dispatch for gas swing assets or capacity

Understanding the risk sensitivities and profile of a gas swing contract asset

Valuing gas swing using accurate estimates of price volatility and seasonality

Valuing swing contracts consistent with market traded gas option prices

Explaining to senior management the intrinsic and extrinsic value of gas swing

Applying a hedging or trading strategy to lock in value, monetise volatility and manage risk

We Understand Your Market

A more liquid and active gas swing contract market along with increased volatility from increased LNG imports, the collapse in the oil price, demand reductions from the pandemic, extreme weather, and uncertainty in spot prices are creating significant opportunities for traders and holders of gas swing assets to experience increased returns, but are also creating increased risks when holding such assets. These unique market dynamics underpin the need for a specialised approach to energy trading and risk management for natural gas swing market participants.

Be confident that you are working with specialists that understand your natural gas swing challenges. With many years of experience, we see your swing valuation concerns from a practical, real-world perspective.

Our Solution

Lacima offers two solutions for natural gas swing market participants: Lacima Trader and Lacima Analytics – providing a complete solution from structuring and trading to risk management of swing portfolios. Lacima’s solutions use the same consistent models and methodologies to capture the unique market characteristics whilst providing the comfort of stress testing and scenario analysis tools to analyse future uncertainty.

Whether you are in Trading, Structuring & Origination or in Risk Management, use Lacima’s solutions to accurately value gas swing contracts and support key decision making by leveraging Lacima’s risk solutions to gain deep insights into the drivers of risk and how they change through time. Lacima calculates the full range of market and credit risk metrics including Earnings-at-Risk and Revenue-at-Risk, as well as more standard risk management metrics such as Value-at-Risk (VaR) and Potential Future Exposure (PFE), for superior trading and risk management results.

Traders, Structurers, and Risk Managers can enjoy a range of benefits including:

  • Value and hedge the intrinsic and extrinsic value of a swing contract
  • Drill down to granular revenues and costs to a daily level over the life of a deal
  • Understand the value under multiple valuation strategies, not just on a single strategy that is profitable at one point in time
  • Flexibly design bespoke gas swing dashboards
  • Integrate with market data from 3rd party providers like Bloomberg, Reuters or Trayport
  • Utilise a range of valuation methods including Intrinsic, Rolling Intrinsic, Basket of Spreads and Spot Optimal
  • Identify trades required to rebalance to optimal positions for monetisation of trading strategies
  • Obtain real-world actionable outputs including optimal position, individual trades profit and loss and a full set of Greeks
  • Analyse and obtain detailed drilldown to all sources of value with an exhaustive list of output properties for all models including Greeks, unit Greeks, model parameters and individual simulations
  • Stress Test inputs such as market prices, volatilities or correlations to quantify potential effects on a gas storages valuation and required hedges
  • Calibrate to market implied volatilities as well as to historical spot and forward data