Calculating Exposure Using a Benchmark Estimate

You can create a Benchmark Estimate to mark to market a Cargo contract when there is no $/ton index available but there are relevant $/day (TC) and bunker indices.

If there were a published index in $/ton, you could do the following calculation to find the future value of your contract:

Net P&L = (Market Freight Rate/Ton - Contract Freight Rate/Ton) * Contract Qty

However, as there are only $/day and bunker indices, you can estimate the Net P&L of the contract arising from shifts in the prices of these indices using the benchmark calculation.

Bunker Exposure

The bunker exposure is calculated as follows:

Bunker Exposure = (Fuel 1 Rate - Fuel 1 Market Rate) * Benchmark Fuel 1 consumption tons + (Fuel 2 Rate - Fuel 2 Market Rate) * Benchmark Fuel 2 consumption tons + …

TC Exposure

The TC exposure question is: What Freight Rate would you need to pay for someone’s vessel on the market to carry your cargo for you, given the forward bunker rate? The answer is: The owner of the vessel would have to earn the same TCE from transporting your cargo as the Time Charter rate on the same route.

To use a Voyage Estimate to manually find that Freight Rate, you have to fix the TCE to be equal to the market rate (by selecting the TCE check box on the Voyage Estimate and entering the value in the TCE field), and also change the bunker rates to the market bunker rates. Then use the freight rate that the Estimate will back-calculate in this formula to retrieve the Net P&L:

Net P&L = (Market Freight rate/ton - Contract Freight rate/ton) * Contract Qty

To get the TC exposure figure, use the following formula:

TC Exposure = Net P&L - Bunker Exposure

Multi-Cargo Benchmark Estimate

With configuration flag CFGEnableMultiCargoBenchmarkEstimates, multiple Cargoes can be added to a Benchmark Estimate and scheduled on a voyage.

The TCE and Bunker price from the multi-cargo Benchmark Estimate are used for the M2M valuation the same way it is used for the standard Benchmark Estimate. The bunker tonnage and voyage days are prorated out to the Cargoes based on the CP quantities.

Cargoes created from a multi-cargo Benchmark Estimate are linked by a Benchmark Link ID field on the Cargo.

Linked Cargoes

Exposure details are synced across linked Cargoes.
Changing any of the following synced fields on the Exposure tab of a linked Cargo updates the other linked Cargoes:
- Exposure Basis Month
- Strategy
- Overriding TCE
- Bunker Estimate grid
- Bunker Exposure Breakdown grid
Changing any of the following fields on a linked Cargo breaks the link; when it is broken, it cannot be restored. The Cargoes must be re-created from the Benchmark Estimate to reestablish the link.
- Initial Estimate
- Exposure Method
- Benchmark M2M Basis
- Use Benchmark Adjustment Table
If one linked Cargo is removed, the link with the other Cargoes remains.
A multi-cargo Benchmark Estimate can only be selected from the Exposure tab if the Cargo is linked to the multi-cargo benchmark estimate through the Benchmark Link ID.

Linking a Benchmark Estimate and a Cargo

The following workflow describes how a trader can create a Cargo using a Voyage Estimate and link them so that the Mark-to-Market of the Cargo is using that Estimate.

Create a Voyage Estimate.
Note: The vessel does not need to be the actual vessel that will perform the Cargo contract. In many cases, traders will use standard benchmark vessels and standard ballasting positions for this stage.
On the Voyage Estimate:
1. Select the Benchmark check box at the top right of the form. The Fix Contract button appears on the toolbar.
2. Click and then click Fix Cargo. A Cargo contract is created with the information from the CP Terms Details form.
On the Cargo Exposure tab:
1. The Exposure Method is set to Benchmark Estimate by default, and the Voyage Estimate that generated the Cargo is linked there.
2. Set the TC Route, Correlation, and Benchmark Bunker Curve.
If you want to use a different Benchmark Estimate at a later stage to evaluate the Cargo Exposure more accurately, you can insert a new line and select a different Estimate in the Benchmark Estimate table.

When a voyage with multiple Cargoes is scheduled, all linked Cargoes are pulled into the voyage.

Creating a Voyage Estimate from a Cargo-Linked Benchmark

You can create a Voyage Estimate from a Cargo based on the linked Benchmark Estimate:

On the Cargo toolbar, click Estimate and then click Add Cargo To New Estimate From Benchmark.
A new Voyage Estimate appears in an Estimate Worksheet.

Changing a Benchmark Estimate Itinerary to Match a Cargo

Using the Trading Profile, you can dynamically change a Benchmark Estimate Itinerary according to the Cargo and use it in the exposure calculation. Follow these steps:

Create a Benchmark Estimate.
On CP Terms Details, specify all the itinerary options.
Verify that the Freight Type is Flat Rate.
On the Benchmark Estimate toolbar, click , then click Fix Cargo.
On the newly created Cargo, set the Freight Type to Use Price Matrix.
On the Cargo Pricing tab, click the Update from Opts button and update all the pricing details.
On the Cargo Exposure tab, set the Benchmark Route and Correlation, and the Benchmark Bunker Curve, if relevant.
On the Trading Profile, select the Overwrite Itinerary on Benchmark Est check box.

Name/Flag	Description

Name/Flag	Description
Enable Benchmark Estimate CFGEnableBenchmarkEstimate	In Voyage Estimate Details view, under Estimate Summary, a Benchmark check box appears. To mark an Estimate as a Benchmark Estimate, select the check box. Benchmark Estimates must have exactly one cargo, and they cannot be fixed. On COA and Cargo/VC In forms, an Exposure tab appears. If a cargo is linked to a Benchmark Estimate via the Exposure tab, the market rate will be used as the TCE in the Benchmark Estimate and back-calculate the $/ton rate in the Trading Profit and Loss. In Cargo Matching, when creating a New Program, a Create Estimate From Benchmark check box appears; if you select the check box, the Benchmark Estimate linked to the cargo will be used as the basis for the Estimate.
Enable Multi Cargo Benchmark Estimates CFGEnableMultiCargoBenchmarkEstimates	When enabled along with CFGEnableBenchmarkEstimate, lifts the requirement that Benchmark Estimates must have exactly one cargo. Further, causes Cargoes created from the same Benchmark Estimate to be linked and sync exposure information. Cannot be enabled alongside CFGEnableCargoBooking.
Lock Initial Estimate CFGLockInitialEstimate	Locks the initial Benchmark Estimate after the Cargo contract is created. When the Cargo contract is Confirmed, it can be edited, but the corresponding Initial estimate is locked. For all other statuses, the Initial estimate can be edited, but Freight Type and Frt Rate fields on the Cargo cannot. They must be updated from the Initial estimate (applies when CFGSyncCargoWithInitialEstimate is ON).
Sync Cargo With Initial Estimate CFGSyncCargoWithInitialEstimate	Syncs the Cargo with the Initial Estimate, as long as there is only one Cargo and one Initial Estimate; if the same Initial Estimate is used for multiple Cargoes, one:many will not be synced when the Initial Estimate is updated. If the Estimate has two Cargoes linked to it, the Open Contract button on the toolbar is named Contracts and has two options: Open Contract opens the first Cargo. Open Related Cargoes opens a selection window with all Cargoes that have that Estimate as their Initial Estimate. When a VC In is set to use a TCOV Benchmark Estimate, the VC In will not be updated when a change is made to the Initial Estimate. When CFGLockInitialEstimate is also enabled, and there are multiple Cargoes that use the Benchmark Estimate as the Initial Estimate, this flag is ignored: The Estimate can be edited and saved.

IMOS On-Prem - Working With Benchmark Voyage Estimates