Working capital requirements resulting from the use of futures and options are volatile and put extreme pressure on the liquidity position of commodity firms.
Business planning now requires a data-driven approach to model the liquidity requirements of existing and new business in different market conditions.
OpenGamma uses proprietary analytics to allow firms to reduce the costs of credit facilities used to finance derivatives, and optimise the capital used to collateralise derivatives positions.
Benefits
Protect working capital by measuring capital efficiency.
Reduce capital requirements by optimising desk and firm-level margin requirements.
Increase return on capital by projecting future liquidity requirements.
Results
30%
working capital reduction.
€ Millions
of financing costs saved.
€ Billions
of capital to be reallocated to strategic projects.
Protect Working Capital.
Understand the drivers of capital requirements to improve allocation.
Challenge
Liquidity requirements that result from price volatility can threaten a firm’s viability as they struggle to meet margin calls, and it is not always obvious which strategies or positions are the drivers of capital usage.
Solution
Track working capital requirements for desks and strategies, and explain changes over time to improve capital allocation.
“Embedding OpenGamma into daily processes will enable Uniper to lower margin costs, helping to boost liquidity and manage periods of market stress.”
Reduce Capital Requirements.
Free up capital by executing with our optimisation recommendations.
Challenge
Hedging requires access to clearing capacity which often leads to adding new clearers, but creates significant capital inefficiencies due to the loss of netting benefit – reducing capital efficiency and increasing costs for traders.
Solution
OpenGamma simulates all of the possible trade allocation and alternative product scenarios to remove capital efficiencies across desks, entities, clearers and exchanges.
Increase Return
on Capital.
Anticipate future liquidity requirements
for existing and new business to reduce
financing costs and increase returns.
Challenge
Price volatility can be an opportunity for traders to generate profit, but it also threatens the viability of those firms as they could run out of capital to meet sudden and large margin calls on their hedges.
Optimal capital allocation requires the ability to plan forward as the future evolution of portfolios and market data has an impact on liquidity requirements.
Solution
Improve the long-term allocation of capital to desks and strategies to increase returns by modelling future cashflows under all market conditions.
