Streamlined pricing repository for complex pricing and risk reporting
All portfolio valuation is founded on market price and option information. Having the ability to imply necessary information from market data to generate the required building blocks of portfolio valuation - mainly forward price curves and volatility matrices - is key to both meaningful valuation and effective risk management. This is true regardless of the state of the market, but is particularly tested in times of market turmoil.
With the goal of obtaining, maintaining, and analyzing available market information for portfolio valuation and risk management, Allegro Price 8.1 provides the following functionality:
- Market data verification and filtering
- Calibration and building of monthly, daily, and hourly mark-to-market (MtM) forward price curves
- Calibration and building of implied volatility matrices, both for energies and FX
- Estimation of historical volatility, including the exponentially weighted moving average methodology with implemented bias adjustment under insufficient price history
- Beta hedge tool
- Full spectrum of standard type options and energy-specific options
Risk managers and traders benefit from the ability to perform model parameter calibration and MtM price and volatility analysis. From curve building to final portfolio valuation and risk management, Price 8.1 offers the control, accuracy, and timeliness that today’s companies need to optimally participate in energy markets.
Price 8.1
The Allegro Price 8.1 component provides the ability to view and capture market pricing information, imply the necessary forward price curves and volatility matrices, configure position valuation data, and devise pricing strategies. With these tools in place, customers effectively calculate positions, value their portfolio and create all necessary reports to support improved decision making. Price 8.1 provides flexible tools to capture, create and access pricing data for any energy commodity including coal, natural gas, electric power, crude, refined products and NGLs and easily manage exposures to price volatility. When integrated with Allegro’s Price Connect component, the system allows for automatic, instantaneous data flow from commonly used external pricing sources directly into the Allegro 8 platform. This functionality enables automated forward price curve and implied volatility matrix generation.
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Key Benefits |
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Price Data Repository - Current Prices, Forward Prices, Option Prices, Currencies, Interest Rates
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Automatic access to the best available pricing data accessible to all business users for price risk management
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Data Verification and Filtering - Current Prices, Forward Prices, Option Prices, Currencies, Interest Rates
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The ability to make corrections prior to initiating portfolio valuation by filtering data for mispricing and inappropriate values.
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MtM Forward Price Curve Tool - Monthly, Daily, Hourly, Combination Curves, Calibration of Mean-Reverting Underlying Price Model with short and long-term equilibrium prices and mean reversion, Calibration and use of multiple seasonality factors, Calibration and use of seasonality factors across specific periods along the curve
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Provides a sophisticated and practical approach to building MTM curves when market quotes are not uniform in monthly granularity, and when markets are illiquid or do not extend far enough in time. Additionally, the Daily MtM curves can be built based on the Monthly MtM curves, and – in turn – Hourly curves, with weekly seasonality, can be built based on the Daily MtM curves. Finally, combination curves can be built, such as the around the clock curves based upon the on-peak and off-peak curves.
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Implied Volatility Matrix Tool - Energies and FX, Calibration of Long-Term historical volatility and mean reversion, Extrapolation and Interpolation across strikes and time
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Provides MtM option valuation. With an embedded mean-reverting model, the tool can calibrate long-term implied volatility and mean reversion based on the provided market quotes, in addition to extending and interpolating across strikes and time.
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Historical Volatility Estimation - Period-specific estimate, Exponentially Weighted Moving Average (EWMA) Estimate with Bias Adjustment (1% Conf.)
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Historical volatility estimation is based on the user-provided time range
for historical price return observations. In addition, it allows for EWMA
historical estimates. Based on the user-provided value of the factor in EWMA, the estimation will calculate the necessary number of price return observations for a 1% confidence EWMA volatility estimate. If the price range provided by the user is insufficient to cover the required number of observations, Price 8.1 will calculate the resulting EWMA volatility bias, and make adjustments based on that information.
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Beta-Hedge Tool - Betas for Systematic Delta Risk Calculations, Minimum variance hedge calculations, with residual risks, Intra and Inter Market Betas and Hedges, Inter Market Betas and Hedges by same time bucket
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Allows traders and risk managers to achieve minimum variance hedges when managing their positions. Similarly, it allows traders and risk managers to express their risks in systematic risk terms, both intra-market as well as
inter-market.
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Valuation Configuration - Forward Curves, Volatility, Correlations, Option Models
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Consolidated platform to streamline data needed for risk reporting including Mark to Market (MtM) reports, Profit and Loss reports, Value at Risk (VaR) calculations and Monte Carlo simulations
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Price Methods - Fixed, Floating, Index, Trigger, Composite, Formula, Basket
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Flexible solution to easily manage the most complex pricing methods |
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Product Quality Adjustments
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Automatic price management specific to a particular commodity product characteristics, such as gravity specifications
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Full Audit Capability
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Built in audit capability to provide accuracy and support compliance |
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