The Importance of Real-Time Forward Curves

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The Importance of Real-Time Forward Curves

Leveraging Technological Advances to Manage Risk

The ability to manage and utilize accurate forward price curves has always been an important aspect of commodity trading and risk management -- indeed, it is at the very heart of price risk management. Despite this, the collection of price time series data and the creation, validation and maintenance of curves, has also always proven to be somewhat problematic – particularly in illiquid, thin and/or real-time markets.

In the last several years, as market oversight by regulators, stakeholders and financiers increased in scope and intensity, forward curve development and use has become even more critical to those trading and/or managing commodity portfolios, particularly as profitable trading opportunities become more difficult to find. Coupled with a dramatic increase in the quantity and velocity of price and related data, the use of new tools and solutions is required to ensure accuracy, completeness, consistency and auditability.

This paper examines these issues in depth and analyzes potential solutions that will aid traders, analysts and risk managers in addressing their needs for real-time and easy-to-use price curve tools.

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