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About
The Hedge Ratio model provides an overview of all paper and physical trades positions and their hedge ratio, categorised according to portfolio, trader and category (by default). You may adjust the grouping according to your needs. Definition of Hedge Ratio can be found here. All your paper and physical trades positions in the selected portfolio will be displayed in the model and used to calculate the hedge ratio.
The rows are the various categories of assets in the portfolio while the columns indicate product information such as trader, category, paper position and physical position. The table acts like a pivot table and can be categorised and organised by groups according to your needs. You can click here to learn how to customise the table by arranging and filtering the columns based on your preference, and saving the table layout(s) as a template.
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Navigation
To access the quantitative model/report, click on 'Dashboard' from the navigation sidebar on the left.
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Note:
- The Hedge Ratio model only shows outstanding/existing positions. For example, if the paper trade’s Valuation Date is over, the trade will not appear in the model. If ESTIMATED PRICE or ACTUAL PRICE is input, the contract will not show in the model as well.
- Product coefficient is 1 by default and is applied to both paper and physical trades.
Hedge Ratio Paper and Physical Position Adjustment:
- You can input the position adjustment value (positive/negative sign) in both Paper and Physical Position Adjustment columns which will be added to the respective paper or physical trades positions to form the total positions. Click on SAVE button to save the value. Hedge Ratio will be calculated accordingly.
For example, if physical position is 700, Physical Position Adj is -200, total physical position will be 500. Physical Position Adj will be summed up in group master row. Then the adjusted positions will be used to calculate the hedge ratio
- Please note that in order to use this function, you need to change the UNIT at the side to PHYSICAL or METRIC TON.
Calculations for Hedge Ratio:
Default
- Calculation for Hedge Ratio = Sum (all paper positions with exchanges in China) / sum (rest of the positions) * 100 %
Exchanges in China: [SHFE, DCE, ZCE, HXCCE, CFFEX, INE, COTC]
- Calculation for Hedge Ratio should apply to coefficient: e.g., PAPER POSITION is 100, but coefficient set by the user is 0.9, then it should be "0.9 * 100 + others".
Customised
If the above default calculations do not apply to you, you may choose to customise the calculations by placing different products on the numerator or denominator according to your needs. If you did not set up this setting, hedge ratio's calculation will use the above default method.
For example, if I want SHFE/CU and SHFE/PB to be on the numerator, I can select the Category, Product, Instrument, Coefficient, and select NUMERATOR for the Fraction; and put DENOMINATOR for SHFE/SS.
Click on "Submit" and the hedge ratio will be calculated according to your customisations = (SHFE/CU+SHFE/PB)/SHFE/SS * 100 = (-1+200)/(-8)*100 = -2487.5
Trades will be categorised according to the Path: TRADER>CATEGORY>PORTFOLIO>STRATEGY by default. The Hedge Ratio will be calculated for each path.
CURRENT LOGIC:
- If the contract is not sold yet, P/L will remain as unrealised P/L, even when TITLE TRANSFER DATE is input. So once contract is sold, it will be closed and P/L will be realised P/L
- To close a contract, ACTUAL PRICE and TITLE TRANSFER DATE must be input
- Only contracts with the same CATEGORY can close each other
- For contracts under the same CATEGORY, sales contract must have TITLE TRANSFER DATE and ACTUAL PRICE to close purchase contract; purchase contract will be closed on a FIFO basis; CLOSE DATE of the closed contract will be the same as the sales contract's TITLE TRANSFER DATE
- HEDGE RATIO, POSITION MATRIX and PHYSICAL TRADE INVENTORY model will only show outstanding positions. If ESTIMATED PRICE or ACTUAL PRICE is input, the contract will not show in the model
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Name | Images/Description |
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Portfolio | Select a portfolio of interest. You may select multiple portfolios to be displayed in the model. |
Excl T Plus | Tick: Exclude all trades with "T PLUS" (eg T+1) and portfolio P/L and positions will be recalculated Untick: Include all trades with "T PLUS" (eg T+1) and portfolio P/L and positions will be recalculated |
Filter | Remove Product Filter If you do not want certain products to be displayed in the model, you can filter them out.
To remove the filter, click on the red bin button on the right. All products will be displayed as per default. Note: that you will only be required to do this once and the setting will be saved in that model. Coefficient Setting Coefficient is 1 by default and applies to both paper and physical trades. If you want to set specific coefficient for each product, you can use this setting. Otherwise, you can keep this empty. Click on the blue "+" button and select the category and product from the dropdown list. Select the instrument and input the coefficient. Once done, click 'Submit' and the Hedge Ratio model will be updated according to your settings. Fraction Setting Calculations for Hedge Ratio: Default
Customised You may choose to place different products on the numerator or denominator according to your needs. If you did not set up this setting, hedge ratio's calculation will use the above default method. For example, if I want SHFE/CU and SHFE/PB to be on the numerator, I can select the Category, Product, Instrument, Coefficient, and select NUMERATOR for the Fraction; and put DENOMINATOR for SHFE/SS. Click on "Submit" and the hedge ratio will be calculated accordingly = (SHFE/CU+SHFE/PB)/SHFE/SS * 100 = (-1+200)/(-8)*100 = -2487.5 |
Comments | The inserted comments will be displayed at the bottom of the application. This can be useful for documentation purposes or for settings description. |
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Name | Description | Type | Example |
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Portfolio | Portfolio selected | Portfolio (Selection) | ABC |
Category | Category of product | Text | Copper |
Product | Name of product | Text | LME/NID3MR |
Instrument | Physical or Paper Trade | Text | Physical or Paper Trade |
Coefficient | Coefficient of product for hedge ratio | Number | 1 |
Comments | Useful for documentation purposes or for settings description. | Text | - |
Output
Description | Type | |
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Product/Strategy Information | The trades are automatically categorised into their respective groups to provide a comprehensive overview of paper position, physical position and hedge ratio.
You can reorganise your data by dragging-and-dropping the columns at the top of the table to 'set row groups'. | Text |
Unit Selection | Units are displayed as Lots by default. To change the units, select from the dropdown list. DEFAULT: Units displayed in lots PHYSICAL: Units displayed according to the physical trade's units (eg Metric Tons) | Text |
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