Optimized Risk Management

A metal processor with an existing hedge program for pricing mismatches and stock-at-risk realizes he faces forward yield curve risk when hedges are settled. He decides he needs to consult people experienced with running hedge programs to see if ways for mitigating this risk exist. We are brought in to:

• present the options he has to control yield curve risk
• provide longer term oversight to achieve a broad based understanding of required decisions

After work with his risk team they begin to realize contango gains and minimize backwardation losses through a program of forward lock-ins. They retain our help on their weekly hedge committee to monitor this program and participate in their decisions to hedge discretionary stock-at-risk.