Volume 3 — Valuation and Risk Metrics © Copyright 2002, CCRO. All rights reserved. 38 Step 5 Step 6 Approximation: Use delta equivalent volumes. These can be obtained for each asset and commodity associated with an asset. Report Level 1. Model-defined delta equivalent commodity volume by location and tenor associated with a given asset 2. Hedge transaction (delta) equivalent commodity volumetric by location and tenor associated with a given asset 3. “Net hedged” commodity volume by location and tenor associated with a given asset 4. Aggregation of all such positions as needed for different purposes Market Year Definition Definition for Portfolio Identify Positions Report: Value Report: Changes in Value Volumetric Exposures Operating Margin at Risk Stress Tests 1 2 3 4 5 6 7 8 We can report on a daily basis (or as needed) the change in the fair or MTM value of each component of the portfolio, subportfolio, and the total portfolio. Note that as time elapses, the market years interval needs to be reexamined for the following reasons: 1. The market for the commodities becomes more liquid, and contracts of longer tenors are traded increasingly frequently. 2. Through passage of time, what was once a component of the non-market years interval now flows into the market years. Note: Either of the above will affect (1) the reported MTM/fair value and (2) the P&L changes. It is therefore important that this aspect be considered very carefully if any information from this exercise is to be made public. Market Year Definition Definition for Portfolio Identify Positions Report: Value Report: Changes in Value Volumetric Exposures Operating Margin at Risk Stress Tests 1 2 3 4 5 6 7 8