Matrics - Trade Physical and Financial Optionality
Use Consistent Models for Physical and Financial Options

The freight market includes optionality in many forms. Financial FFA options are available, but liquidity is often limited. More importantly, most kinds of physical contracts such as TC or CoA have some built in optionality. Failing to account for this will lead to misleading profit/loss numbers and positions (tonnage balance).

Matrics will price financial and physical optionality in a consistent way, using models that are suited for the falling volatility term-structure of the freight market and using the same volatility assumptions throughout. Consistent pricing of physical and financial optionality allows the trader to identify profit opportunities resulting from optionality being cheaper in one market than the other. This can be used e.g. by buying physical TC optionality and selling financial FFA optionality, or vice versa.

The option models are built into all pricing routines in Matrics and are normally applied automatically from the user’s perspective. For “what if” purposes it is also possible to override the option models and test the effect of things like “maximum TC period”, “minimum TC period”, "all optional CoA voyages exercised", etc.

Quickly Test Different Volatility Assumptions and Option Strategies

For the financial option trader, Matrics also provides a built in option calculator. While options entered into the main portfolio are always priced with respect to the current volatility curves in Matrics, the option calculator is designed for easy experimentations with different volatility assumptions. A quoted volatility can be entered directly to determine the corresponding premium, or a premium can be entered to determine the corresponding implicit volatility. The underlying volatility model can also be estimated from historical forward prices.

The options calculator prices Asian options since these have become the market standard in the financial freight market.When an option is actually traded, it can be booked into the portfolio directly from the option calculator.

Example: Financial Option Calculator
Screenshot of financial option calculator