Realistic Monte Carlo Price Simulations

Applications Monte Carlo price simulations

KySim produces Monte Carlo simulations of forward and spot prices in commodity and FX markets. Monte Carlo simulations form the basis for assessing risks, performing valuations, and evaluating trading and hedging strategies. Our customers use KySim to:

• Generate power price simulations
• Generate gas price simulations
• Generate oil price simulations
• Generate coal price simulations
• Generate CO₂ price simulations
• Generate metals price simulations
• Generate freight rates price simulations

You can benefit from realistic price scenarios by taking better decisions in an uncertain environment, and thereby reducing risk and enhancing profits.

Outputs Monte Carlo price simulations

KYOS price simulation software contains a set of advanced models to capture the primary dynamics of prices in terms of volatilities, correlations and spread dynamics. It is based on a combination of statistical and fundamental elements, such as multi-factor modelling, stochastic volatility, regime-switches, and the concept of cointegration. The output of KySim consists of:

• Simulated commodity and FX prices in forward markets
• Simulated commodity and FX prices in spot market

Cointegration in Monte Carlo price simulation

Especially for longer horizons of several months or many years ahead, KYOS advocates the incorporation of fundamental price relations through cointegration. When generating Monte Carlo price simulatations, cointegration  ensures that spreads remain within economically reasonable bounds.

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