As part of KRM’s mission to bring increased visibility and lower cost risk management to capital market organizations, we want to make you aware the choices you have to manage negatively priced assets in our software products.
We are recommending utilizing a “Normal Distribution Model” or “Bachelier Model” to correctly assess the risk inherit in the recent price action in Crude Oil and its related options. These models currently exist in our applications and your local KRM22 support team can help you implement them if you require assistance.
This change from a log-normal futures model (“Whaley Futures” model for American Style options and “Black Futures” for Euro Style options) will allow users to value and evaluate the risk of negative Crude Oil prices and negative Crude Oil option strikes. The model will also allow Risk Slide shocks to breach the zero-price barrier.
KRM22’s Global Risk Platform provides applications to help you address your firm’s regulatory, market, technology and operations risk challenges and to manage your entire enterprise risk profile. KRM22 is a public Group listed on AIM and headquartered in London, with offices in several of the world’s major financial centers.