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P&L atttribution | ||
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Let's say we added up the P&L of all our trades today, and then did the same tomorrow - the two values would probably be different - but why? Some reasons:
P&L attribution calculates the change in P&L for each of the above individually - and any other factors - so that the effect of each cause may be understood Detail The exact calculation is rather complex, for example if we want to know the effect of new trades, do we value them against yesterday's curve price or today's? If we use today's then in effect we have partially attributed some P&L change to the new curve price In general the P&L of each trade, or a netted exposure across a portfolio is is recalculated individually for each change that might affect the p&l (forward curve, fx rates etc), keeping each other effect constant Because each change is taken in isolation the the sum of all P&L attribution detail does not add up to the overall change in P&L... P&L attribution is often called P&L explained or P&L explainer | ||
Party | ||
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A party is an organization, or part of an organization, which is legally involved in a trade Detail Every trade has at least two parties: a buyer and a seller Our organization, or part of organization, is referred to as the first party, the other organization, or part of an organization is the counterparty There may be a broker who introduces the buyer and seller - the buyer and seller are not known to each other until the trade is executed If our organization executes a trade on an Exchange then the Exchange is the counterparty | ||
Physical | ||
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The attribute, or adjective, physical usually refers to trades and business process that results or involves in the physical delivery of energy or a commodity Detail A trade is physically settled when it will result in the delivery of an energy or commodity. This is in contrast to a trade that is financially or cash settled Physical business process involves the activities around Scheduling delivery of electricity and gas (Operations) Logistics of moving and delivering other commodities by ship, barge, train, plane, truck etc. including loading and unloading and inspections | ||
Portfolio | ||
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A group of trades Detail Trading organizations group trades in order to simplify position management, risk reporting and settlement. By grouping trades that have a common or complementary purpose, traders can focus on the performance of the portfolio as a whole, rather than the individual trades that make it up Note the similarity to a trading book | ||
Position | ||
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All physically settled derivatives imply either an obligation to deliver, or take delivery of, a commodity at a location at some time in the future The obligation to deliver a commodity is called a short position of that commodity at that location and time in the future The obligation to take delivery of a commodity is called a long position of that commodity at that location and time in the future Detail Traders sum the position of a set of trades to know their net position across that group of trades - usually called a portfolio, a book or a strategy. This is known as the traded, or trader, position Traders take a long position if they believe the value of the commodity at the time of delivery will be greater than the contract, or strike, price Traders take a short position if they believe the value of the commodity at the time of delivery will be less than the contract, or strike, price. Taking a short position is sometimes known as shorting Each time a trade is executed the trader's net position changes. Most traders update their net position as each trade is executed | ||
Position Reporting | ||
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Traders make, and lose, money by taking positions, either short or long at various points in the future Open positions in the future imply a risk that needs to be managed very carefully as changes in the forward curves affect the value of the net open position It is therefore critical that traders know their up to date position at all times This is the purpose of Position Reporting by means of Position Reports Detail | ||
Power | ||
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In Energy Trading terms Power is almost always synonymous with Electricity In physics terms power is a measure of the rate of energy conversion per unit time Detail In SI terms energy is measured in Joules One watt = one Joule per second 1 kilowatt (kW) = 1,000 joules per second Since power is energy per unit time (energy divided by time) it follows that energy is power multiplied by time Frequently energy is measured in these terms: 1 kWh = 1 kilowatt for an hour = 3,600 * 1,000 joules = 3,600,000 joules | ||
Product | ||
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Prompt | ||
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Quark spread | ||
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