Four factors.
One loan.
A price is an opinion. A loan is a number derived from a price after deducting every way the collateral can lose value. This page computes the second one.
Model a lot
Inputs
Pre-filled: 60 t, 86 ptsResult
LTV 52.2%| Quality multiplier Q | 1.07 |
| Decay factor D at expiry | 0.94 |
| Effective aged months (temp-adjusted) | 10.4 |
| VaR 95% over term | 28.8% |
| Liquidation value | ¥236.1万 |
The spot anchor is where valuations die quietly
Commercial grade
ICE Arabica C-price plus origin differential plus FX. Public, auditable, no argument.
Specialty grade
C-price under-prices a 90-point lot by a wide margin. Specialty needs a transaction index we build from our own fills, partner roaster purchases and auction results.
Three traps
Futures up while the differential collapses; USD-denominated collateral against a CNY loan; and closing prices that gap through a margin call overnight.
Quality must be asymmetric
Good quality caps at 1.15. Poor quality can fall to 0.65. An up-only curve invites sample beautification; the downside is what a lender actually holds.
| Component | Band | Adjustment | Why |
|---|---|---|---|
| SCA 88+ | ≥ 88.0 | +0.10 | Competition grade, deep buyer pool |
| SCA 86–87.9 | 86.0–87.9 | +0.07 | Specialty, standard premium |
| SCA 84–85.9 | 84.0–85.9 | +0.03 | High commercial |
| SCA 82–83.9 | 82.0–83.9 | 0.00 | Baseline |
| SCA 80–81.9 | 80.0–81.9 | −0.08 | Thin secondary market |
| SCA below 80 | < 80.0 | −0.25 | Moves to the commercial pool, different index |
| Moisture | 10.5–11.5% | 0.00 | Outside the band: −0.04 per 1 pt, capped at −0.10 |
| Defects (300 g) | 0 / 1 / 2 | +0.02 / 0 / −0.06 | Hard gate, not a weighted average |
Temperature is a financial parameter
Decay is modelled as conservative step bands, adjusted with Q10 = 2: every 10°C doubles the effective ageing rate. Cooling a vault from 28°C to 18°C is not an operating expense — it is a balance-sheet improvement.
Decay factor D by vault temperature
Pledge ratio vs volatility, by liquidation horizon
| Months in storage | D at 18°C | D at 24°C | D at 30°C | Trading status |
|---|---|---|---|---|
| 0–6 | 1.00 | 0.94 | 0.94 | Flavour window intact |
| 6–12 | 0.94 | 0.94 | 0.88 | Normal trade, slight aroma loss |
| 12–18 | 0.88 | 0.80 | 0.80 | Discount to clear |
| 18–24 | 0.80 | 0.68 | 0.68 | Blend and dark roast only |
| 24+ | 0.68 | 0.68 | 0.68 | No new pledges accepted |
On a ¥3.24m lot, the 18°C versus 28°C gap at the twelve-month mark is roughly ¥480,000 of pledgeable value — a number that pays for a lot of refrigeration.
Nobody negotiates a pledge ratio
It is a residual: whatever is left after the worst plausible price move, the re-inspection discount, the cost of disposing of the collateral and a buffer for model error.
| Component | Base case | Notes |
|---|---|---|
| VaR 95%, 3-month liquidation horizon | 28.8% | 1.645 × σ 35% × √0.25 — the haircut covers time-to-liquidate, not the loan term |
| Re-inspection discount | 6.0% | If quality is re-tested lower during a dispute |
| Disposal cost | 8.0% | Own roasting and retail channel; open market is 15% |
| Model buffer | 5.0% | Parameter error and operational slippage |
| Resulting LTV | 52.2% | Capped at 75%, floored at 30% |
| Trigger | Maintain LTV | Action |
|---|---|---|
| Normal | ≤ 55% | No action. Daily snapshot filed. |
| Watch | 55–60% | Notify borrower, offer partial repayment or additional collateral. |
| Margin call | 60–72% | T+1 cash or collateral top-up. No waiver without credit approval. |
| Liquidation | > 72% | Route to our own roastery at the pre-agreed disposal price. |