IMOS - Unpriced Component

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An Unpriced Component is a contractual item that has an amount linked to a market index. You can add multiple Unpriced Components to a contract. 

On a Cargo, VC In, Time Charter In, or Time Charter Out contract, click Add Unpriced Elements.

Open

On the Unpriced Component form, do any of the following:

• Add remarks to the field at the top (up to 512 characters).

• Click + to add a set of fields for each component and complete them.

Open

General Grid

In the General section, you can define the Unpriced Component and its market curve details.

The Unpriced Component form includes Settlement Curve and Forward Curve fields, enabling users to select two symbols in case the settlement curve does not have forward rates.

You can create the following Components:

• For Cargoes and VC Ins:

• For Time Charter contracts:

Averaging Period

On the Averaging Period Grid, specify a time window during which the average market price is calculated.

• Fill Days: When Holidays or All option is selected, make sure that holidays have been specified in the Data Center Holiday Calendar so those dates will populate based on the Fill Rule specified.

• Fill Rule: The Fill Rule specifies where the price is to be taken from. When Last Spot Pricing is selected, the price will be the last spot price on the curve on or before the Event Date.

Structure

Select the Structure check box to use the Structure table to define the component's price as a function of the index price. The calculation uses the formula: (Index price - Level) * (Correlation) + (Offset) = Unpriced Component Price.

By default, the Structure check box is not selected. The price for the Unpriced Component is calculated using the following formula: (Index price * Correlation) + (Adjustment) = Unpriced Component Price, averaged across the averaging period. 

• Range: Enter a range using inclusive [] and exclusive () brackets. In the below examples, 1 and 5 can be replaced with any number:

  • (1,5) or (1:5) = 2, 3, 4
    The range starts at 1, but does not include it, and ends at 5, but does not include it.

  • (1,5] or (1:5] = 2, 3, 4, 5
    The range starts at 1, but does not include it, and ends at 5 and includes it.

  • (1,) or (1:) = 2 through infinity
    The range starts at 1, but does not include it, and ends at infinity. 

  • (,5) or (:5) = infinity through 4
    The range starts at infinity and ends at 5, but does not include it.

• Correlation: Any Correlation entered in the General grid of the Unpriced Component will affect the Index price, subsequently affecting the Unpriced Component price when using the Structure table. This can result in the double application of a premium. 

Structure Validation

Click the Validate button to check the calculation and ensure no two ranges overlap. If there are no errors, the Structure Validation form appears:

You can create a table with rows for different Index prices on this form based on specified Start, Step, and End amounts.

The Contract column shows the Unpriced Component’s price for the corresponding Index price.

Index-linked Structure

The checkbox Apply Corr. to Days is available when the Structure checkbox is selected. This checkbox accounts for correlation values in the pricing structure, improving your ability to assess market risk. When applied, the Veson IMOS Platform adjusts the calculated Exposure Days with a formula that subtracts the correlation value in the structure to better reflect the number of days in the period exposed to the market.

Embedded Derivatives Grid

The Embedded Derivatives grid is for reference only; values here do not affect any calculations.

After you close the Unpriced Component form, you can click Edit Unpriced Elements to edit the Unpriced Components.

Invoicing Unpriced Components

On the Freight Invoice, you can view Unpriced Components, override the Market Rate, and view the Unpriced Component Rate Breakdown report.

1. On Voyage Details, click Freight and then click Freight Invoice.

2. Type a Counterparty for the Freight Invoice. The Unpriced Components tab appears on the Cargo grid:
   
   

3. Do any of the following:

   • To override the Market Rate, edit the Market Rate field.

   • To view the Unpriced Component Rate Breakdown report, right-click the line and click Rate Breakdown.

Unpriced Component Rate Breakdown

The Unpriced Component Rate Breakdown report shows you a list of days and their corresponding market rates. For BAF components, pricing calculation details also appear.

To access it, do any of the following:

• For TC Contracts with Unpriced Components, right-click the Hire line on the contract, then click Show Rate Breakdown.

• On the Freight Invoice Unpriced Components tab, right-click the line and click Rate Breakdown.

• For Cargo contracts with $/MT, Model TC, Model Fuel Types, Model TC Inbound, and Model Fuel Types Inbound Unpriced Components, click the Frt Rate value.

  • To indicate that the Cargo has an Unpriced Component, the Freight Type field turns bright pink: _.

Unpriced Elements without an Index Integration

Unpriced elements can be used to calculate complex variables for a freight rate without the use of an integration, albeit with a manual price entry. The setup is similar to the above description with some things to note:

BAF setup:

Settlement Curve: This has not been filled out, however it is a required field.

Structure Table: Level is the base bunker price for a contract. The correlation is a static figure which is a contract value. It can be a given in the contract or sometimes calculated by a bunker surcharge divided by the base price.

In a freight invoice, an average price for a given voyage can be manually entered as below:

This will calculate the Bunker Surcharge: