Tailor-made models

Powerful solutions

Over the years we built numerous solutions, tailored to the specific needs of market participants. A strong theoretical background is used for practical solutions, which can directly be implemented in day-to-day business. We often use simulations, as they allow for a flexible way to analyze a large number of variables. The results may include Value-at-Risk, Earnings-at-Risk, Potential Future Exposure (for credit risk) and optimized hedge strategies. Knowledge areas KYOS has core competencies in the following areas:

Price modelling

KYOS has extensive knowledge about econometric modelling of energy prices. In addition, we build tools to estimate model parameters (e.g. volatility, correlation, mean reversion, etc.) that can be fed in the application, like:

• Spot models based on regime switches, GARCH, jump diffusion, etc.
• Forward curve models to jointly model market traded maturities of different commodities. Basis for the simulation can be co-integration in combination multi-factor simulations.

Fundamental price modelling

For long term simulations of commodity prices and correlated power prices, KYOS advocates the use of co-integration. With this method, not only correlation and volatility structures are incorporated, but also fundamental relationships in energy markets. This simulation method is very useful to value long term investment in power plants.

 

Power plant investments

KYOS has analyzed different proposals for investments in physical and virtual power plants. Basis for this are realistic plant dispatch possibilities and hedge strategies, while incorporating heat curves, maintenance schemes, dispatch restrictions and various cost components. Especially for power plant analysis, KYOS advises to use fundamental price models.

 

Load modelling

Simulating future load patterns is necessary to price customer profiles. We build models that capture the relationship between energy demand and weather or other factors. Load models can be used to value end-user contracts, to make capacity bookings and to forecast spot prices.

Risk calculations
Value-at-Risk, stress tests, hedge statistics, etc.