Tool for forecasting commodity price fluctuations

Portfolio optimiser

Anticipating a change from a regulated market to a free market for a particular commodity, our client - an internationally operating bank - wanted to better assess its multi-billion-dollar portfolio in this sector. In particular, our client wanted an indication of when their portfolio or specific customers would require more attention under the new market conditions.

The challenge

How PA helped

PA performed time series analyses to develop a novel forecasting model for market volatility. By using an ensemble model and tracking commodity price development for several producers in the industry, we could predict how waves of price volatility would propagate through an international market. From these market developments, we identified trend setters and followers in pricing behavior among the producers in the industry.

Benefit for the clients

With an indication of opportunities or unrest in the market three months in advance, our client could use their sector knowledge to better advise customers and assess potential risks to their portfolio. In addition, by understanding past market volatility, our client also had a better indication of which customers had made poorly timed investments and could be at risk. This allowed for early interventions to the benefit of both customer and bank