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Discounted cash flow

Valuing an oil swap or asset by discounting expected future cash flows back to today.

Discounted cash flow (DCF) is a valuation method used in oil trading to determine the present value of future cash flows from swaps, structured products, or physical assets. By applying a discount rate, traders account for time value of money and risk. DCF analysis is essential for comparing contracts with different settlement dates or payment structures. In oil markets, DCF is often used to price long-dated swaps, storage deals, or infrastructure-linked trades. Accurate DCF calculations require assumptions about discount rates, credit risk, and future price curves.

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