Screen-print style poster of a scale weighing upside against risk over an LNG carrier

CASE STUDIES / RISK · DEC 2​025

Same forward profit, $400M apart in risk.

Three contract mixes calibrated to near-identical forward profit hide radically different risk. The dual-index book buys the spread upside and the heaviest downside; the other two are implicit hedges.

-$400M

THE DUAL-INDEX BOOK AT THE WORST CORNER OF THE STRESS GRID

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Three contract mixes, one profit.

01 · THE SETUP

All three books run November 2025 to December 2027 on Revithoussa demand and Calcasieu Pass supply, one cargo per month, no cancellations. They differ only in indexation and spot access.

S1 · DUAL INDEX

  • HH-indexed supply against TTF-indexed demand
  • Full exposure to the transatlantic spread
  • No cancellations: every voyage must run or unwind

S2 · SPOT OUTLETS

  • Same book plus optional spot outlets on both sides
  • Unwind matches priced slightly unprofitable by design
  • Losses capped: unwind at a small loss instead of sailing a bad voyage

S3 · TTF ONLY

  • Supply switched to TTF: netback pricing
  • The spread exposure disappears by construction
  • Lower profit, and the upside is gone with the risk

NOV 2​025 TO DEC 2​027 · CARGO SIZE 3.4 TO 3.8M MMBTU · ONE CARGO PER MONTH EACH SIDE · X-LNG ENGINE

Identical at the forward curve.

02 · CALIBRATION

Indexations were tuned so all three strategies earn the same at current forwards. Every difference that follows is risk, not expected return. At the curve the spot outlets stay unused, so S1 and S2 even sail identical voyages.

$63.6M

S1 · FORWARD PROFIT · $0.76/MMBTU

$63.6M

S2 · FORWARD PROFIT · $0.76/MMBTU

$63.1M

S3 · FORWARD PROFIT · $0.75/MMBTU

<1%

SPREAD ACROSS ALL THREE STRATEGIES

Volatility pulls the books apart.

03 · MONTE CARLO

At base volatility the dual-index book has by far the highest mean profit and the widest tails. Under high volatility the spot-outlet book overtakes it on average, because its losses are capped while the dual-index downside keeps growing. S3 stays lowest and tightest throughout.

$0M$50M$100M$150M≈98≈99≈63LOW VOL · 50%165.2112.166.7BASE VOL≈104≈139≈71HIGH VOL · 150%S2 OVERTAKESS1 · DUAL INDEXS2 · SPOT OUTLETSS3 · TTF ONLY · MEAN $M
MEAN PROFIT PER VOLATILITY REGIME · 1,000 PATHS EACH · EXACT BASE-VOL MEANS: $165.2M / $112.1M / $66.7M

Three books, three shapes of risk.

04 · THE SHAPE OF RISK

The base-volatility distributions tell the story the means cannot: the dual-index book runs from losses to $400M, the spot-outlet book has its left tail cut off by the unwind option, and the TTF-only book is a needle around $63M to $75M. Its only residual variation is inter-month pricing: a cargo loads in one month and discharges in the next.

$0M$100M$200M$300M$400MS1 MEAN $165.2MS2 MEAN $112.1MS3 $66.7MPORTFOLIO PROFIT · $M · BASE VOLATILITY · 3 X 1,000 PATHSS1 WIDES3 TIGHT
PROFIT DISTRIBUTIONS AT BASE VOLATILITY · CURVE SHAPES ILLUSTRATIVE, MEANS EXACT · HISTOGRAM RANGES FROM THE ENGINE RUNS

The spread is the risk.

05 · STRESS GRID

Varying HH and TTF from 0.4x to 1.6x maps each book onto a profit surface. S1 swings from roughly +$600M to beyond -$400M as the spread flips. S2 floors its losses near zero via spot. S3 has no HH exposure at all, and TTF changes cancel out of its netback formula.

S1 · DUAL INDEX0.4x1.0x1.6xHHS2 · SPOT OUTLETS0.4x1.0x1.6xHHS3 · TTF ONLY0.4x1.0x1.6xHH1.6x1.0x0.4xTTF≈ +$600MWORST CELL BEYOND -$400MLOSSES FLOORED NEAR $0≈$63M ACROSS ALL TTF-$400M$0+$300M+$600M
DETERMINISTIC GRID, HH AND TTF EACH 0.4X TO 1.6X · CELL COLOURS QUALITATIVE, LABELLED ANCHORS FROM THE ENGINE RUNS

06 · THE VERDICT

The dual-index book buys the largest upside and a $400M stress-case downside:
spot outlets and single-index supply are implicit hedges.

Three books, one forward profit, three risk appetites. The choice between them is not a P&L question; it is a decision about which tail you can live with.

Which mix survives your worst market.

07 · TAKEAWAYS

✓

Volatility reorders the ranking

At base volatility the dual-index book leads with $165.2M. Under high volatility the spot-outlet book overtakes it, roughly $139M against $104M, because its losses are capped while the dual-index tail keeps falling.

✓

Spot outlets are a cheap floor

Each unwind match costs a small loss by design, yet across the whole stress grid they floor the book near zero where the dual-index book runs beyond -$400M.

!

The spread is the risk

All three books earn the same at the curve, within one percent. Everything that separates them afterwards, from +$600M to beyond -$400M, is the HH-TTF spread. Pick the mix by risk appetite, not by forward P&L.

Modelled with X-LNG.

08 · THE TOOL

1

Your world goes in

Contracts, vessels, charter rates, prices, spot assumptions and constraints. The full book, not a slice.

2

One optimal plan comes out

Feasible, P&L-maximising and constraint-compliant, re-solved for every scenario in minutes.

3

Every number checks out

Each result can be recalculated by hand. Transparency your risk committee can audit.

CLOUD-BASED, ANY PORTFOLIO SIZE · BUILT AND ADVANCED DAILY BY ~25 MATHEMATICIANS, PHYSICISTS AND COMPUTER SCIENTISTS