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 can be used directly for valuation and risk management. 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.

KySim helps to fully capture the option value which is embedded in energy assets and contracts. With KySim, valuation is more accurate, market hedges are more effective and risks metrics are more reliable.

Benefits

1. Apply cointegration for realistic commodity spreads

KySim has been developed for simulating multi-commodity spreads: spark spreads, dark spreads and any other commodity spread. The combination of correlation and cointegration 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. The inputs can be compared with and overwritten by implied volatilities, derived from option prices.

Price simulations are 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

Power markets contain specific structures which do not fit in a pure statistical approach. Power prices are determined by the movement of gas, coal and CO2 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.

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

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Features

KySim contains advanced methodologies for simulating commodity prices. Volatilities can be calculated, or entered based on option prices.

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

Methodology

KySim has been developed with the best statistical methods. This includes time-varying volatility, correlations, cointegration, mean-reversion, jumps and regime-switches. Market price parameters are calibrated on historical data. KySim is uniquely dedicated to energy price dynamics, away from pure financial market models, e.g. using cointegration and a fundamental methodology for power prices, spark and dark spreads.

Trusted by organisations all over the world

Other Solutions

Optimization & Valuation

KYOS offers fast and accurate solutions to value flexible assets and contracts in energy markets, such as power plants, gas storage facilities and swing contracts.

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Portfolio management / CTRM

Does your company have a significant exposure to commodity prices? Then KYOS has a cost-effective solution for your daily management. The KYOS CTRM offers a detailed insight in your exposures, expected cash-flows, Mark-to-Market and more.

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Risk analytics

KYOS offers unique software for measuring portfolio risks in energy and commodity markets. The risk analytics include Value-at-Risk, Cashflow-at-Risk and Earnings-at-Risk.

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Contact KYOS

KYOS
Nieuwe Gracht 49
2011 ND Haarlem
The Netherlands

E-mail: info@kyos.com
Tel: +31 (0)23 551 02 21

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