New data sources and increasing volumes
The Importance of Real-Time Forward Curves A ComTechAdvisory Whitepaper seen the emergence of “ virtual assets ,” financial products that allow companies to gain some of the advantages of physical asset ownership without the burdens of owning hard assets , including regulatory oversight , debt service and the inherent operational risks . One such example is the ability to arbitrage between oil forward contracts and storage value using CME instruments that represent physical oil storage .
Renewable energy mandates are also driving significant changes in the power and gas markets as increasing reliance on unpredictable sources of renewable generation ( such as wind and solar ) has created both opportunity and challenges . As operational variability creates increasing price volatility , energy traders are finding new opportunities in the intraday , real-time , energy markets . However , given the highly granular pricing and operational data generated by these markets , market participants have had to develop new programmatic trading approaches and risk capabilities that can quickly identify opportunities , and limit down-side risks , within vast amounts of high-velocity data .
New data sources and increasing volumes
Regulations mandating increased transparency , the growth of market-focused social media sources , and a move to automation , including IOT sensors , have resulted in massive increases in the amount and diversity of data available in today ’ s commodity markets . Traders are , in turn , called upon to make faster decisions , despite the need to consider more data points than ever before in that decision-making process . As such , commodity trading companies are , by necessity , seeking out more sophisticated technologies that can aggregate , analyze and present real-time visualizations and rich analytic tools on their traders ’ desktops .
Risk managers , facing similar challenges in terms of data velocity and volume , require similar tools but , equally important , also require a consistent approach to position management and valuations throughout the trading organization . Often , different valuation methods and tools will be in use across front , mid and back offices that can result in discrepancies in positions and valuations that result in improperly valued positions and inaccurate hedges – increasing risks and requiring constant reconciliation and explanation . Despite these challenges , spreadsheets remain more or less ubiquitous in the industry , being used as ad hoc and sometimes even primary tools for a wide range of data aggregation , position management and risk activities . Despite the usefulness and familiarity trading staff may have with Excel , companies are recognizing its use poses any number of risks -- including potential abuse , errors in data entry , capture or calculation , and lack of auditability – and are seeking alternatives to ensure adequate control , auditability and consistency of methodologies .
While trading organizations are forced to consume a plethora of new data sources as noted above , the practice of risk management is still defined by prices – historical prices , spot prices and forward curves ; and increasingly , this information is needed closer to real-time and from a greater number of sources to support a wide variety
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