System and method for rapid evaluation of raw material price risk mitigation contracts

A method for mitigating raw material price risks by both a contract buyer and a contract seller through a facilitator comprising:

• a) providing an end-user with access, via an electronic network, to a user interface, adapted to receive input information from the end-user, the user interface being associated with a computer of the end-user, and wherein the end-user is the contract buyer, the contract seller, or both;
• b) receiving from the end-user via the electronic network, a first settlement parameter;
• c) generating a first simulated covered outcome and a first simulated un-covered outcome based upon the first settlement parameter, historical data, contract specifications, and contract variables;
• d) transmitting the first simulated covered outcome and the first simulated un-covered outcome to the end-user;
• wherein the step of receiving the first settlement parameter and the step of generating the first simulated covered outcome and the first simulated un-covered outcome are repeated for any number of additional settlement parameters, provided by the end-user to produce any associated number of additional simulated covered outcomes and additional simulated un-covered outcomes;
• wherein the user interface is adapted to graphically display a selector, the selector having a substantially continuous range of settlement parameters, and is adapted to solicit from the end-user the first settlement parameter and any of the additional settlement parameters from the substantially continuous range of settlement parameters;
• wherein the step of receiving the first settlement parameter and the step of generating the first simulated covered outcome and the first simulated un-covered outcome and any number of subsequent iterations thereof are performed substantially instantaneously, with the aid of the selector, enabling the end-user to explore, visualize, and assess the raw material price risks and subsequently communicate feasible contracts to other transacting party before the first simulated covered outcome and the first simulated un-covered outcome and any number of subsequent iterations thereof are rendered moot by changes to the raw material price risks due to market forces;
• wherein the other transacting party is the contract seller when the end-user is the contract buyer, and the other transacting party is the contract buyer when the end-user is the contract seller;
• wherein a price risk is defined by a differential between a cost incurred by the contract buyer or by the contract seller when market prices rise or decrease above or below a defined price limit and a financial reimbursement to offset additional raw material costs incurred by the contract buyer or by the contract seller when the market prices rise or decrease above or below the defined price limit;
• wherein the contract buyer or the contract seller incurs costs when the market prices rise or decrease above or below the defined price limit and the contract seller or the contract buyer guarantees payment to the other transacting party as the financial reimbursement to offset the additional raw material costs incurred by the contract buyer or the contract seller when the market prices rise or decrease above or below the defined price limit;
• wherein the first settlement parameter and the additional settlement parameters are a hypothetical price of a raw material represented as a price per unit;
• wherein the first simulated covered outcome and any of the additional simulated covered outcomes are a total covered cost, which is a function of a current price of the raw material, the price limit, the premium, the quantity, or any combination thereof;
• wherein the first simulated un-covered outcome and any of the additional simulated un-covered outcomes are a total un-covered cost, which is a function of the first settlement parameter or the additional settlement parameters, and the quantity;
• and
• wherein changing a position of the selector causes additional calculations to be performed with resulting simulations being graphically displayed in discrete sub-windows of a single window within the user interface.