Aspect’s CTRM Software Makes Complex Pricing Simple
Written by the Aspect Enterprise Solutions Product Management Team.
Did You Know…that AspectCTRM offers one of the most comprehensive complex pricing formula tools for commodities trading companies? This blog explains how Aspect’s commodity trade and risk management cloud software supports a wide spectrum of pricing terms across multiple commodities with example formulas.
Negotiating pricing term contracts can be very complex. To maximize profits when markets are volatile, many factors need to be considered when agreeing on pricing terms, including product conditions, currencies, quality specifications and more. AspectCTRM allows traders to store and calculate complex pricing terms as trades are created, avoiding the use of third party tools.
Spreadsheets Pose Risks
Entering complex pricing formulas into spreadsheets can easily take several hours, and worse, human error can lead to an avalanche of problems. When dealing with massive volumes of data and formulas, it’s easy and common for typing mistakes to be made in spreadsheets.
Complex Pricing Made Simple
With AspectCTRM, complex pricing is a simple part of the trade creation process. Traders no longer have to rely on external calculations made in spreadsheets. Aspect’s powerful pricing formula tool allows users to create rules that can be applied to any trade. Trades can be created with a fixed price, or they can be entered with a calculated price based on one or more instruments or curves.
To implement complex pricing on a trade, users simply specify ‘Underlying” or “MTM” on the trade entry screen, which automatically brings up a formula entry screen. To create a formula, a pricing instrument or curve is selected from a provided list. Users can add custom curves to the list by using the Formula Instruments tool. Formulas can contain as many instruments as required. The period and rules associated with the price calculation are defined by the pricing schedule, often used for physical trades.
Pricing formulas can use as many instruments as needed and can also contain mathematical operations, for example: “Dated Brent”/2 or “Cargoes CIF NEW” + “FOB MED Italy” * 5. Multiple functions are also available in the formula screen, which helps replicate complex prices. AspectCTRM is continuously extending the list of available functions within the pricing tool to handle any complex trade. AspectCTRM for Metals offers sophisticated refining and concentrates contract features with multiple layers of rounding, conversions, and dependency from quality specs, operational dates, and more.
Examples of AspectCTRM Complex Pricing Functions