Gas storage

  • Increase revenue & manage risks of gas storage products
  • Captures all storage characteristics
  • Quick calculations, fully automated
  • Easily interfaced with market data
  • Accurate valuations and hedges via LSMC methodology
KyStore supports traders and portfolio managers in natural gas markets. The gas storage optimization software raises revenues from gas storage trading operations, provides accurate valuations and reduces risk with adequate hedge recommendations. The model uses advanced stochastics including Least Squares Monte Carlo techniques to capture the full optionality in gas storage facilities.


1. Spot Market: inject or withdraw?

Decission support Each day, the gas storage optimization model tells you what is optimal to do: inject or withdraw. Boundary prices indicate below which price you should inject and above which price withdraw. Together with boundary prices of other storage assets and swing contracts, a portfolio manager can rank the assets from low opportunity cost to high opportunity cost, creating an internal merit order for portfolio optimisation.

2. Forward Market: keep the risk or lock in profits?

KyStore shows which forward transactions are optimal to hedge risks and lock in profits. The user can choose between intrinsic hedging and delta hedging, two strategies to secure profits. It can provide hedge recommendations for the asset alone, for multiple assets together or for a portfolio of assets and existing trading positions.


3. Storage market: what is a fair price?

Finally, the storage model answers the question: how much should I pay for storage? The gas storage optimization model shows which part of the value is intrinsic, and can be made easily, and which part is extrinsic, requiring a more active trading strategy. Extrinsic values are derived from an intuitive and realistic Monte Carlo simulation model.
A combination of forward and spot trading strategies is applied to the simulated price scenarios, using rolling intrinsic and least-squares Monte Carlo. This type of valuation provides a fair assessment of the future value. Backtesting of the model is another feature: it shows how much money you would have made in the past, following a specific trading strategy.

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All storage characteristics are included in the gas storage optimization software. This includes time and volume dependent injection and withdrawal rates, time varying costs, interruption rights and reduced availability because of maintenance.

KyStore is fully embedded in the KYOS Analytical Platform. Automated data feeds ensure that you get up-to-date trading recommendations every day. Transparency is guaranteed, because analysts can evaluate each individual price scenario.

Methodology gas storage optimization

The gas storage optimization software is based on advanced Monte Carlo simulation techniques. Important characteristics are a mean-reverting multi-factor model with long-term, short-term and seasonal dynamics. Users can also import their own price simulations or use those of KySim.

Optimal storage trading and operating decisions are calculated with Least Squares Monte Carlo. The volatility term structure and other simulation inputs are easily derived from historical data with the accompanying calibration tool. Implied option volatilities may be used as well, by overwriting the historical volatility estimates.

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2011 ND Haarlem
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Tel: +31 (0)23 551 02 21

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