Hedge Cover

Assume your organization has some interval rates with the following conditions. The customer will pay for an agreed upon amount of usage at a fixed price. We will call this amount of usage the hedge cover. It is also known as a "reference curve". If actual usage falls above the hedge cover, the customer pays the difference at the market price. If the actual usage falls below the hedge cover, the customer receives a credit for the difference at the market price.

In this example, we assume that the actual usage, the hedge cover, the strike price and the market price are all interval curves with the same interval size.