Profitability · gas price-lock economics
Does hedging pay?
A customizable P&L for a gas price-lock business like paylo.shop. Edit every pricing variable and cost margin below; the model prices the hedge from the paper's optimizer and shows the bottom line with and without it.
Downside protected
$132.50/acct
h*
0.95
Scenario
Net margin / account / yr · hedge = insurance
Expected
Worst 5% (CVaR)
At σ = 25%, hedging to h* = 0.95 gives up $19.81 of expected margin to protect $132.50 in the worst 5% — a 6.7× protection ratio. Raise volatility and the trade gets more favorable.
Revenue / acct
Cost / acct
net margin
−0.4%
hedged / throughput
hedge premium
$19.81
expected cost to hedge
downside protected
$132.50
worst-5% saved
protection ratio
6.7×
protected / premium
return on float
−0.2%
T-bill − user APY
LTV : CAC
-0.9×
LTV −$15.51
Portfolio roll-up
× 2,500 customers
expected net (hedged)
−$12.9k
tail risk removed
$331.3k
cost to hedge
$49.5k
Scenarios persist to a Supabase Postgres database (hedging_profitability_scenarios). Presets are read-only; saved scenarios can be updated or deleted. Hedge costs come from the optimizer: the expected case uses mean cost E[N], the worst case uses CVaR95, at h* (hedged) vs h=0 (unhedged), scaled by annual throughput. Hedging trades a little expected margin for large tail protection. Illustrative — calibrated to the paylo.shop model, not audited figures.