merchant trade capital: unlimited, costless capital?

Download Merchant Trade Capital: Unlimited, Costless Capital?

Post on 01-Jan-2016

14 views

Category:

Documents

1 download

Embed Size (px)

DESCRIPTION

Merchant Trade Capital: Unlimited, Costless Capital?. How much does it take? Identifying Capital Components What’s the cost? Pricing Trade Capital Components Will market bear the cost? Structural Mitigants (Capital Management). - PowerPoint PPT Presentation

TRANSCRIPT

  • Merchant Trade Capital: Unlimited, Costless Capital?How much does it take? Identifying Capital Components

    Whats the cost? Pricing Trade Capital Components

    Will market bear the cost?Structural Mitigants (Capital Management)

  • How Much (Capital) Does it Take?Identifying Capital ComponentsLending (Deploying) Capital Credit AssetsSales Payment cycle (net/25)PRMAs (MTM Assets): Probabilistic Capital Deployed

    Borrowing (Sourcing) CapitalCredit LiabilitiesPurchases: (same payment cycle)PRMLs (MTM Liabilities): Probabilistic Capital SourcedWhy/how is this a bad thing?

  • [A/R slide]

    Chart1

    000

    1700001481.0370866645

    21400004207.2860572558

    32100007755.179919903

    428000011973.6378848635

    535000016775.3786353067

    642000022101.5348083857

    749000027908.9073621791

    856000034164.0386285487

    963000040840.0212206666

    1070000047914.6043365062

    1177000055368.9885137663

    1284000063187.0167990347

    1391000071354.6088690351

    1498000079859.3515862133

    15105000088690.1944038144

    16112000097837.217424592

    171190000107291.451237848

    181260000117044.73455531

    191330000127089.600020962

    201400000137419.181406543

    211470000148027.137302796

    221540000158907.587717577

    231610000170055.060902624

    241680000181464.448380288

    251750000193130.966612669

    261820000205050.124102671

    271890000217217.692975652

    281960000229629.684286418

    292030000242282.326446283

    302100000255172.046280974

    312170000268295.452320765

    322240000281649.319995625

    332310000295230.578464979

    342380000309036.298857136

    352450000323063.683730167

    362520000337310.057595838

    372590000351772.85837261

    382660000366449.629653804

    392730000381338.01369363

    402800000396435.745027616

    412870000411740.644655535

    422940000427250.614724645

    433010000442963.63365925

    443080000458877.751689546

    453150000474991.086738652

    463220000491301.820631749

    473290000507808.19559563

    483360000524508.511020666

    493430000541401.120460427

    503500000558484.428847028

    513570000575756.889902618

    523640000593217.003729657

    533710000610863.314564371

    543780000628694.408679484

    553850000646708.91242371

    561750000296832.808208361

    571820000311672.876064355

    581890000326718.484908079

    591960000341967.727190349

    602030000357418.755943523

    612100000373069.781776313

    622170000388919.070068299

    632240000404964.93834769

    642310000421205.753837477

    652380000437639.931156561

    662450000454265.930163697

    672520000471082.253933222

    682590000488087.44685258

    692660000505280.092832488

    702730000522658.813621496

    712800000540222.267217312

    722870000557969.146368019

    732940000575898.177156807

    743010000594008.117664462

    753080000612297.756704243

    763150000630765.912624299

    773220000649411.432173102

    783290000668233.189423774

    793360000687230.084753473

    803430000706401.043874339

    813500000725745.016912733

    823570000745260.97753376

    833640000764947.922108298

    843710000784804.868919955

    853780000804830.85740954

    861820000390011.793342299

    871890000407596.926865383

    881960000425361.150086245

    892030000443303.359024667

    902100000461422.473781495

    912100000461422.473781495

    922100000461422.473781495

    932100000461422.473781495

    942100000461422.473781495

    952100000461422.473781495

    962100000461422.473781495

    972100000461422.473781495

    982100000461422.473781495

    992100000461422.473781495

    1002100000461422.473781495

    1012100000461422.473781495

    1022100000461422.473781495

    1032100000461422.473781495

    1042100000461422.473781495

    1052100000461422.473781495

    1062100000461422.473781495

    1072100000461422.473781495

    1082100000461422.473781495

    1092100000461422.473781495

    1102100000461422.473781495

    1112100000461422.473781495

    1122100000461422.473781495

    1132100000461422.473781495

    1142100000461422.473781495

    1152100000461422.473781495

    P50 (Expected)

    P95 (Potential)

    Days

    Credit Asset (A/R Exposure)

    outline

    *************_________________________________***************************

    IManaging/Pricing Trade Capital

    AQuantifying and Pricing

    why/how credit risk inherent in transactions:

    1Credit Assets v Credit Liabilitiesunsecured exposure

    term structure of expected fwd exposure

    MTM

    2Pricing embedded capital costsA/R

    term strucutre of potential fwd exposure (distributive)

    (a)Credit Assets (CP Default Risk)MTM

    A/R

    (i)Credit Price: Default probabilities vs. Credit Spreads

    (ii)term matters: optionailty (CP vs. term debt)

    (b)Credit Liabilities (Liquidity / BalanceSheet Tax)

    (i)Funding with uncommitted capital - Risk

    (ii)metaphysical margin call

    (iii)Revolver: contingent capital (puzzle piece)

    3Fully Loaded Capital Costs: Sample Transaction

    BMarket, Contractual and Structural Mitigations

    1Setoff/Netting: Consolidation

    (a)Consolidation

    (b)CMT example

    2Market Structure

    (a)Anonymity with Discrimination

    3Contractual

    (a) Debt X-default, Ratings, Fin Covenants, CEUM, etc.

    (b)Already in earlier bond price?

    capitaltrain

    Capital Trap (Capital Train)

    Gas Exploration and ProducerField (Midstream) AggregatorNational Merchant (with long-haul transport)Merchant Storage Operator (or Merchant with contracted storage capacity)Utility (or "Behind-System" Aggregator)

    4,200,0004,221,0004,200,0004,242,1054,221,0004,263,3164,242,1054,284,6324,263,316

    21,00021,10521,21121,317

    Incremental Capital

    0.005

    Capital Cost

    AR

    Z =2.00

    o =0.20

    P =7.00

    MM/dMM BalPA/RP'A/R'

    0007.000.07.000.0

    110000100007.0070,0007.151,481

    210000200007.00140,0007.214,207

    310000300007.00210,0007.267,755

    410000400007.00280,0007.3011,974

    510000500007.00350,0007.3416,775

    610000600007.00420,0007.3722,102

    710000700007.00490,0007.4027,909

    810000800007.00560,0007.4334,164

    910000900007.00630,0007.4540,840

    10100001000007.00700,0007.4847,915

    11100001100007.00770,0007.5055,369

    12100001200007.00840,0007.5363,187

    13100001300007.00910,0007.5571,355

    14100001400007.00980,0007.5779,859

    15100001500007.001,050,0007.5988,690

    16100001600007.001,120,0007.6197,837

    17100001700007.001,190,0007.63107,291

    18100001800007.001,260,0007.65117,045

    19100001900007.001,330,0007.67127,090

    20100002000007.001,400,0007.69137,419

    21100002100007.001,470,0007.70148,027

    22100002200007.001,540,0007.72158,908

    23100002300007.001,610,0007.74170,055

    24100002400007.001,680,0007.76181,464

    25100002500007.001,750,0007.77193,131

    26100002600007.001,820,0007.79205,050

    27100002700007.001,890,0007.80217,218

    28100002800007.001,960,0007.82229,630

    29100002900007.002,030,0007.84242,282

    30100003000007.002,100,0007.85255,172

    31100003100007.002,170,0007.87268,295

    32100003200007.002,240,0007.88281,649

    33100003300007.002,310,0007.89295,231

    34100003400007.002,380,0007.91309,036

    35100003500007.002,450,0007.92323,064

    36100003600007.002,520,0007.94337,310

    37100003700007.002,590,0007.95351,773

    38100003800007.002,660,0007.96366,450

    39100003900007.002,730,0007.98381,338

    40100004000007.002,800,0007.99396,436

    41100004100007.002,870,0008.00411,741

    42100004200007.002,940,0008.02427,251

    43100004300007.003,010,0008.03442,964

    44100004400007.003,080,0008.04458,878

    45100004500007.003,150,0008.06474,991

    46100004600007.003,220,0008.07491,302

    47100004700007.003,290,0008.08507,808

    48100004800007.003,360,0008.09524,509

    49100004900007.003,430,0008.10541,401

    50100005000007.003,500,0008.12558,484

    51100005100007.003,570,0008.13575,757

    52100005200007.003,640,0008.14593,217

    53100005300007.003,710,0008.15610,863

    54100005400007.003,780,0008.16628,694

    55100005500007.003,850,0008.18646,709

    56100002500007.001,750,0008.19296,833

    57100002600007.001,820,0008.20311,673

    58100002700007.001,890,0008.21326,718

    59100002800007.001,960,0008.22341,968

    60100002900007.002,030,0008.23357,419

    61100003000007.002,100,0008.24373,070

    62100003100007.002,170,0008.25388,919

    63100003200007.002,240,0008.27404,965

    64100003300007.002,310,0008.28421,206

    65100003400007.002,380,0008.29437,640

    66100003500007.002,450,0008.30454,266

    67100003600007.002,520,0008.31471,082

    68100003700007.002,590,0008.32488,087

    69100003800007.002,660,0008.33505,280

    70100003900007.002,730,0008.34522,659

    71100004000007.002,800,0008.35540,222

    72100004100007.002,870,0008.36557,969

    73100004200007.002,940,0008.37575,898

    74100004300007.003,010,0008.38594,008

    75100004400007.003,080,0008.39612,298

    76100004500007.003,150,0008.40630,766

    77100004600007.003,220,0008.41649,411

    78100004700007.003,290,0008.42668,233

    79100004800007.003,360,0008.43687,230

    80100004900007.003,430,0008.44706,401

    81100005000007.003,500,0008.45725,745

    82100005100007.003,570,0008.46745,261

    83100005200007.003,640,0008.47764,948

    84100005300007.003,710,0008.48784,805

    85100005400007.003,780,0008.49804,831

    86100002600007.001,820,0008.50390,012

    87100002700007.001,890,0008.51407,597

    88100002800007.001,960,0008.52425,361

    89100002900007.002,030

Recommended

View more >