Analytics

Making the right choices.

It’s one of the most daunting business challenges faced by energy companies today: complex options commonly have a future value that’s driven by interdependent variables and/or multiple decision points. Among thousands of permutations, traders and risk managers must find the pattern of exercise that will return optimal value.

Allegro decision analytics give users the industry’s most effective tools to optimize transactions and entire portfolios based on complex physical options and financial derivatives.

Allegro prospective analyses, supported by real-time data and flexible, integrated execution capabilities, give users unprecedented strategic agility — enabling them to move in volatile markets with greater confidence and achieve greater profitability within acceptable risk tolerances.

Achieving high performance
Users get the high performance they need to react quickly in fast-moving markets. For example, by mapping Monte Carlo simulations, Allegro provides the most efficient construction of price distributions for all types of options. Users also get the most efficient option pricing algorithms for exotic options found in any commercially available, integrated solution.

High performance is made possible by a variety of sophisticated methods, such as generating paths of correlated stochastic processes for specified forward curves, and volatility and mean reversion curves; normalized and numerically stabilized stochastic processes; and consistent correlation matrices.

Reaching the right decisions

Metrics. Allegro enables users to determine an option’s worth using a built-in or user-defined option model. Allegro valuation approaches include Black-Scholes and stochastic calculus. A formal methodology is provided for option valuation, and a single model for all instruments. Allegro’s model values complex physical options with all the necessary constraints. Users can determine time value and intrinsic value, and test values against sensitivities.

Financial options. Allegro provides the industry’s most complete set of capabilities, including built-in tools for managing NYMEX, IPE, OTC and compound options including price options, spreads, multiple assets, strips, lookbacks and calendars.

Physical options. Users can manage pricing floors and caps, and price triggers; transmission connections, swing contracts, thermal generation and pipeline nomination; and gas injection/withdrawal and hydro storage/pumping.

Allegro solutions excel at managing complex patterns of exercise including decision factors such as frequency, number and quantity. Allegro also takes into account constraints such as physical limitations, minimum and maximum operational quantities, and contractual limits.

Optimal exercise. Allegro’s market optimization process starts with option valuation as an input. For complex options, Allegro decision analytics quickly sift through numerous permutations to determine the optimal exercise pattern.