Credit Exposure Concepts¶

This document explains credit exposure management concepts used in the EWE Numera platform.

Overview¶

Credit exposure represents the potential financial loss if a counterparty fails to meet their contractual obligations. EWE uses Endur's credit risk management module to calculate and monitor exposures.

Exposure Types¶

Current Exposure¶

The mark-to-market exposure at the present date. This represents what would be lost if the counterparty defaulted today.

Calculation: Sum of positive MTM values across all deals with the counterparty.

-- Example: Current exposure by counterparty
SELECT
    pe.lentity_name AS counterparty,
    SUM(f.current_exposure) AS total_current_exposure
FROM fct_credit_exposure f
LEFT JOIN dim_party_external pe
    ON f.dim_party_external_bu_le_attribute_id = pe.dim_party_external_bu_le_attribute_id
WHERE f.metric_date = CURRENT_DATE - 1
GROUP BY 1
ORDER BY 2 DESC

Performance Exposure¶

Expected exposure based on deal performance, assuming the counterparty continues to perform under the contract. This considers future delivery obligations and their expected market values.

Potential Exposure (PEX)¶

Worst-case future exposure calculated using statistical methods and stress scenarios. PEX accounts for:

Market volatility
Contract duration
Commodity type
Historical price movements

The potential exposure is calculated using PEX Factors - commodity-specific multipliers that reflect each commodity's volatility characteristics.

Settlement Exposure¶

Exposure arising from potential settlement failures. This covers the short period around payment dates when payment has been initiated but not confirmed.

PEX Factors¶

PEX factors are commodity-specific multipliers used to calculate potential exposure. They reflect:

Historical price volatility
Liquidity risk
Market structure

-- Example: View current PEX factors
SELECT
    metric_date,
    commodity,
    factor AS pex_factor
FROM fct_credit_pex_factor
WHERE metric_date = CURRENT_DATE - 1
ORDER BY commodity

Exposure Lines¶

An exposure line is a credit limit assigned to a counterparty or group of counterparties. Exposures are measured against exposure lines to monitor credit utilization.

Field	Description
`exp_line_id`	Unique identifier for the exposure line
`exposure_limit`	Maximum allowed exposure
`current_exposure`	Current utilization

Credit Utilization = Current Exposure / Exposure Limit

-- Example: Credit utilization by exposure line
SELECT
    f.exp_line_id,
    pe.lentity_name AS counterparty,
    f.current_exposure,
    f.exposure_limit,
    CASE
        WHEN f.exposure_limit > 0
        THEN f.current_exposure / f.exposure_limit * 100
        ELSE NULL
    END AS utilization_pct
FROM fct_credit_exposure f
LEFT JOIN dim_party_external pe
    ON f.dim_party_external_bu_le_attribute_id = pe.dim_party_external_bu_le_attribute_id
WHERE f.metric_date = CURRENT_DATE - 1
  AND f.exposure_limit > 0
ORDER BY utilization_pct DESC

Netting Agreements¶

Netting reduces credit exposure by offsetting positive and negative positions.

Payment Netting¶

Offsets payment obligations on the same settlement date, reducing the gross amount exchanged.

Close-out Netting¶

In the event of default, allows termination of all contracts with net settlement of a single amount.

Cross-Commodity Netting¶

Allows netting across different commodity types (e.g., gas and power with the same counterparty).

These netting terms are captured in dim_party_agreement:

-- Example: View netting agreements
SELECT
    party_agreement_name,
    has_payment_netting,
    has_close_out_netting,
    has_cross_commodity_netting
FROM dim_party_agreement
WHERE has_payment_netting = TRUE
   OR has_close_out_netting = TRUE

Collateral Agreements¶

Collateral agreements require counterparties to post security (cash, letters of credit) when exposure exceeds thresholds.

Field	Description
`collateral_agreement_id`	Link to collateral agreement
`collateral_agreement_name`	Agreement name

Monthly Exposure Projections¶

fct_credit_exposure_month provides forward-looking exposure projections by month.

High/Low Scenarios¶

Monthly projections include high and low scenarios for:

Potential Exposure: Range of possible future exposures
Performance Exposure: Range based on deal performance scenarios

-- Example: Monthly exposure projection
SELECT
    f.effective_month,
    pe.lentity_name AS counterparty,
    f.potential_exposure_low,
    f.potential_exposure_high,
    f.pot_performance_exposure_low,
    f.pot_performance_exposure_high
FROM fct_credit_exposure_month f
LEFT JOIN dim_party_external pe
    ON f.dim_party_external_bu_le_attribute_id = pe.dim_party_external_bu_le_attribute_id
WHERE f.metric_date = CURRENT_DATE - 1
  AND pe.lentity_name = 'Example Counterparty'
ORDER BY f.effective_month

Data Flow¶

Credit exposure data flows through the following stages:

Endur Credit Risk Manager
        ↓
    UDSR Export (batch simulation)
        ↓
    SAT Tables (full history)
        ↓
    PIT Tables (point-in-time)
        ↓
    Dimensional Tables (fct_credit_exposure)

UDSR (User-Defined Stored Result)¶

UDSRs capture calculation results from Endur batch simulations. Each simulation run produces:

sim_run_id: Unique simulation run identifier
sim_version: Version within the run
scenario_id: Scenario being calculated

The PIT tables select the latest simulation results for each metric date.

EWE-Specific Considerations¶

Legal Entity Mapping¶

EWE has specific business rules for mapping exposures to legal entities. In some cases, exposures involving two legal entities are measured against only one for credit limit purposes.

Party Dimension Linkage¶

All credit exposure facts link to dim_party_external via:

dim_party_external_bu_le_attribute_id

This allows analysis by counterparty business unit and legal entity.

Best Practices¶

Always filter by metric_date - Exposure data is date-specific
Check exposure limits - Compare current exposure to limits
Use monthly projections for planning - Forward-looking risk assessment
Consider netting agreements - Net exposure may differ from gross
Monitor PEX factor changes - Volatility affects potential exposure