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Commodity Hedging

Former Member
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We are trying to use Listed Futures for Commodity Hedging.

Facing 2 problems

We are not able to record price for the Commodity Exposure ID in Hedge Plan in THMEX transaction.

Any  idea how to record the price.

Also wanted to know the calculation type or Hedge strategy which we can use for Listed Futures.

Kindly provide your valuable inputs.

Thanks

Accepted Solutions (1)

Accepted Solutions (1)

Former Member
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HI Abhishek,

The pricing details for the commodity exposure cannot be directly maintained in THMEX.The hedged Item derives these information based on the underlying exposure.

Assuming you are on EhP6, the commodity exposure can be created in 2 ways:

1. By integration with Logistics, exposures from POs, SOs and subsequent activities will autmatically be created in TRM which will have all the information like, Commodity Prices - Fixed or Floating, commodity qty,UoM etc.

2. By creating manually from FTREX1.

For creating through FTREX1, you would need to set up Activity types, which specifies whether the exposure is a PO based or SO based or in simple terms whether its outgoing or Incoming. You define header data by giving the info related to currency, transaction activity and other relevant stuff.

Line item data is where you mention the commodity, qty, commodity UoM,quotation type for pricing, whether the price is fixed or floating, currency, due date. You can even enter the fixed prices there.

You also have sub Raw exposure details, in case you want the exposure position to have split in various percentages, or if the exposure is a foreign currency exposure. Prices are maintined in T-code FC17. For Futures you also need to have commodity curve set up in t-code TANCCMASTER.

Please see the screenshots.

FTREX1

Regards,

Nikhil

Answers (2)

Answers (2)

Former Member
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Thanks for sharing the information Nikhil,

I was aware of the process to fix price through Raw exposure in Exp mgmt 2.0.

I wanted to know if there is any other process to directly record the price in THMEX.

Moreover do you have idea on the calculation type used for comm future for listed future?

Former Member
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Hi Abhishek,

Its really as per client to decide which Hedge strategy to use. Also depends on What accounting principle you want to follow and what prices you want to consider for your calculation.

However if its just for testing, you can try using the Cash Flow: Spot period method with the calculation category $offset method.

Also there is no other way to enter the commodity prices apart from the ones i mentioned in my previous post.

Regards,

Nikhil

former_member198450
Active Contributor
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Hi,

Please follow the below process.

  1.   Go to t.code THMEX create hedge plan
  2. Create raw exposure: FTREX1
  3. Release raw exposure: FTREX2
  4. Transfer Released Exposure to Hedge plan: FTREX12
  5. Create a deal or contract(say for example I have created hedge plan for foreign exchange in this care I shall create a deal under product type 60A or etc based on client requirement.
  6. Create hedge relationship: THMEX
Former Member
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Hi Jain,,

The steps are correct. but how do you record the price of the exposure in the Hedge plan.

If the raw exposure price is variable then how do we fix that price and record it in the hedged item in the hedge plan.

former_member198450
Active Contributor
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Hi Abhishek,

Please create a hedge plan as forecast item then create it for commitment item.

It works in that way, I'm little busy or else  Please elaborate the example, i'll replicate in my system and get back to you in day or two.

Regards,

Jain