It has become increasingly important for energy companies to have immediate access to live market prices. For several applications within energy trading and pricing, it may be good enough to use end-of-day market prices, but live price curves (intraday) are especially critical for:
For example, small margins in the energy supply business require companies to on top of the market. When prices move with a few cents only, compared to the previous closing, this should be reflected in their price offers in order to avoid a direct loss.
KYOS has an advanced model for the construction of hourly and daily price forward curves (PFC’s). The model is called KyCurve. It has a wide acceptance by energy market players, and also underlies the KYOS PFC data service (see www.pricecurves.com). It constructs forward curves with the right shaping factors, arbitrage-free to all available market prices (i.e. market-neutral). In principle, this model can be used with both end-of-day and intraday market prices. However, for intra-day pricing this is not the best solution. First of all, a full recalculation of the PFC intra-day may take too long. Secondly, a full recalculation may lead to larger intra-day PFC variations than is generally desirable.
For this reason, KYOS has developed a separate application for live PFC’s. It takes the end-of-day PFC as a starting point and then adjusts it to the live market prices with the smallest changes possible. This is fast and robust.
The benefit of this separate application does not only lie in the methodology, but also in the usability and smooth processing of market data. At the end of each trading day, the KYOS Analytical Platform creates a PFC with settlement data, or reads such a curve from an external source. This is a completely automated process. This curve is ideal for Mark-to-Market pricing of the portfolio, or for risk management.
During the day new price information becomes available. The new information consists of (i) traded contracts, (ii) live bids and (iii) live offers. The KYOS intraday application performs the following main steps:
Please contact KYOS or call +31 (0)23 5510 221 for more information about live price curves.
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