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Background
Agiblocks customers who trade ratio contracts for Cocoa-products like Cocoa butter want to record the cost of “switches” and include them in the calculation of the price. A “switch” is what is called a price rolling in Agiblocks (as you “switch” from pricing against 1 futures month to pricing against another futures month).
Unlike contracts that use a differential, ratio contracts do not have a premium that will be added/subtracted to the futures price. Instead they have a ratio, a factor by which the futures price is multiplied.
Functionality and Calculations
From version 3.31.15 onwards, Agiblocks will handle price calculation and price rolling for ratio contracts almost the same way as for differential contracts. For both differential and ratio contracts, when a To be fixed contract is rolled, you can record the difference between the 2 pricing months and this difference is added or subtracted to get an adjusted premium for the part of the contract that was rolled to the new month. This means:
| • | For all contracts there is both a premium and a ratio and a ratio correction. |
| • | In all cases the calculation formulas are: |
| o | Price = (Fixed Futures Price + Contract Premium) * Contract Ratio |
| o | Valuation = (Market Futures Price + Market premium) * (Market ratio + Contract Ratio Correction) |
| • | For a commodity that has differential selected: |
| o | The contract form offers the possibility to enter the initial premium. |
| ▪ | If differential is not selected, it defaults to 0. |
| o | The risk tab offers the possibility to view and edit the initial premium. |
| ▪ | When differential is not selected, this field is not displayed and the remains at its default value 0. |
| • | For a commodity that has ratio selected: |
| o | The contract form offers the possibility to enter the initial ratio and ratio correction |
| ▪ | when Ratio is not selected, the ratio defaults to 1 and the ratio correction defaults to 0. |
| o | The risk tab offers the possibility to view and edit the initial ratio and ratio correction. |
| ▪ | when ratio is not selected, these fields are not displayed and remain at their default values. |
The only difference is that:
| 1. | Ratio contracts start off with a premium of 0.00 |
| 2. | Ratio contracts still apply the ratio as a multiplication factor |
Note: As a result of these changes, you will no longer be able to enter an adjusted ratio on a price rolling as doing is now incorrect.
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