Monte Carlo price simulations

  • Generate very realistic scenarios of forward and spot prices
  • Enjoy user-friendly interface and fast calculations
  • Apply best-in-class mathematical methods
  • Benefit from cointegration to obtain realistic spreads
KySim is the main Monte Carlo simulation engine in the KYOS Analytical Platform. It allows traders and risk managers to generate a large number of realistic price scenarios, which you can use directly for valuation and risk management. Futhermore, KySim relies on a hybrid approach of statistics and fundamentals. It contains a mix of best-practice methodologies to capture specific dynamics in energy and commodity markets.

We have designed KySim to help you to fully capture the option value which is embedded in energy assets and contracts. With KySim, valuation is not only more accurate, but market hedges are more effective and risks metrics are more reliable.


1. Apply co-integration for realistic commodity spreads

KYOS developed KySim specifically for simulating multi-commodity spreads: spark spreads, dark spreads and any other commodity spread. The combination of correlation and co-integration ensures both price returns and price levels remain at fundamentally correct levels.

2. How can I validate my model assumptions?

KySim calculates statistical inputs based on historical time series. An intuitive multi-factor model has been implemented with long-term, short term and seasonal factors. You can easily compare the inputs, and if necessary overwrite them by implied volatilities, derived from option prices.

Price simulations are also accessible to the user per price path, giving full transparency over the outputs and the possibility to assess the quality of individual scenarios.

3. Include fundamental elements of power markets with Monte Carlo

Power markets contain specific structures which do not fit in a pure statistical approach. For example the movement of gas, coal and CO2 prices determine power prices. Via a country specific merit order power prices remain connected to the underlying commodities. On top, the impact of the Carbon Floor on the power price can be specified explicitly.

In short, the combination of sound statistics with fundamental elements leads to realistic power price scenarios, needed to correctly value power assets.

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KySim contains advanced methodologies for simulating commodity prices. It is possible to calculate the volatilities, or enter them based on option prices.

Of course we have fully embedded KySim in the KYOS Analytical Platform. Automated data feeds ensure you have up-to-date price simulations available, ready for use in energy asset optimization, hedge optimization, valuation or risk calculations.


We incorporate the best statistical methods in KySim. For example, the model includes time-varying volatility, correlations, co-integration, mean-reversion, jumps and regime-switches. In addition, historical data calibrate market price parameters. Moreover, KySim is uniquely dedicated to energy price dynamics! We have moved away from pure financial market models, e.g. using co-integration and a fundamental methodology for power prices, spark and dark spreads.

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