Market Risk Simulation for Multi‑Currency Revenue Linked to Brent (EUR Book)

Market Risk Simulation for Multi‑Currency Revenue Linked to Brent (EUR Book) This guide shows how to simulate monthly revenue risk when commodity prices are linked to Brent (in USD), the book currency is EUR, and you have revenue streams across EUR, USD, INR, and AUD markets. We model Brent with a mean‑reverting process and preserve correlation with FX using a Monte Carlo method. Assumptions: Prices are monthly and linked to Brent in USD. Brent follows a mean‑reverting (Ornstein–Uhlenbeck) process in log‑space. FX pairs are modeled in log‑space (e.g., GBM for simplicity) and jointly simulated with Brent via a correlation matrix. Book currency is EUR; portfolio revenue is aggregated in EUR. Why this setup works: ...

2025-09-08 · 6 min · rokorolev

Upstream Asset Evaluation & Stochastic Economic Modeling Framework

This post reconstructs the evaluation, financial modeling, and decision analytics framework used when leading an upstream (oil & gas) analytics team (circa 2015–2018). It blends technical reservoir & production modeling with fiscal, stochastic, real‑options, and portfolio layers plus emerging carbon governance. 1. Checklist (Top-Level Components) Scope definition Technical (subsurface & production) models Commercial & fiscal models Market & price modeling Cost & economic models Real options layer Stochastic engine & correlations Portfolio aggregation Risk & sensitivity Carbon / ESG integration Data architecture & governance Validation & model risk management Implementation blueprint 2. Scope & Objectives Asset lifecycle: exploration → appraisal → development planning → execution → ramp-up → plateau → decline → abandonment. Decisions supported: license bidding, sanction (FID), phasing, drilling sequence, facility sizing, hedging, M&A, divestment, suspension, expansion, abandonment timing. Outputs: NPV (pre/post tax), IRR, payback, PI, EMV / ENPV, free cash flow profiles, value at risk (P10/P50/P90), option-adjusted value, carbon-adjusted value, capital efficiency, portfolio efficient frontier. ...

2025-09-04 · 6 min · rokorolev