Index Manager
QR Analytics Server offers advanced “what you type is what you get” formula or index creation capabilities. The Index Manager Module allows users to type in any mathematical expression involving basic processes (prices and volumes), constant coefficients and other indices.
Formulas may use standard mathematical operators +, -, *, / and may use parentheses ( ) nested to any level. There are also 30+ built-in mathematical functions tailor-made for financial use, and more can be added for your individual needs.
For example here is a hypothetical fuel oil index using built-in function MonthlyAverage:
Note the formula also involves 3 basic processes that are data curves. There is 1 foreign exchange FX_USD_EUR and 2 fuel oil prices WTI and Fuel Oil.
Formulas may use standard mathematical operators +, -, *, / and may use parentheses ( ) nested to any level. There are also 30+ built-in mathematical functions tailor-made for financial use, and more can be added for your individual needs.
For example here is a hypothetical fuel oil index using built-in function MonthlyAverage:
Fuel Oil Index = FX_USD_EUR * (WTI + MonthlyAverage (Fuel Oil)) / 2
Note the formula also involves 3 basic processes that are data curves. There is 1 foreign exchange FX_USD_EUR and 2 fuel oil prices WTI and Fuel Oil.
Once an Index is created and saved, the System then allows you to write a transaction on this index. In our example we could write a deal on the Fuel Oil Index above. Settled values and MTM will be computed using the actual data curves of the 3 pricing points mentioned.
You do not need to provide mixed data for any indices. Only basic data curves of underlying processes are required. All calculations are then done by the formula evaluator. So an index formula can be used as a virtual float or pricing point on which a deal is transacted.
You do not need to provide mixed data for any indices. Only basic data curves of underlying processes are required. All calculations are then done by the formula evaluator. So an index formula can be used as a virtual float or pricing point on which a deal is transacted.
Indices can be mapped to any deal as the main cash flow of a deal or any of its fees, charges, etc. This is particularly useful for retail electricity and gas deals, or structured products with complex cash flow models. In practice there can be deals with 30+ curves all being computed by index formulas.
This technique is powerful and simple enough that it can easily model the cash flow of any deal structure. The best part is it’s purely a matter of configuration. No further code development of any kind is necessary.
This technique is powerful and simple enough that it can easily model the cash flow of any deal structure. The best part is it’s purely a matter of configuration. No further code development of any kind is necessary.
