Dynamic Hedging

Take the Risk out of Renewable Power Trading with Our Optimal Hedging Solution

Renewable power producers sell futures contracts for smoother cash flows and to lower their exposure to market risk. But how should renewable producers decide which contract to sell and when and how much?

Quantego‘s dynamic hedging model now offers a model-driven solution for optimal hedging. Reduce market price exposure with our dynamic hedging solution for renewable power producers. Find the right mix of yearly, quarterly, monthly, weekly futures and spot that matches your company's risk preferences.

What's inside the software?

KEY FEATURES

  • Optimal mix of futures and spot trading
  • Optimal timing of orders for yearly, quarterly, monthly, weekly futures
  • Joint stochastic process of spot and futures prices
  • Value-at-risk optimization
  • Highly customizable model and interactive dashboard
  • Rapidly deployed and securely hosted on AWS VPC
  • Automate repeated optimization tasks
  • Fully integrated in the QUASAR® Cloud platform

  A detailed model of the futures trading process

Quantego’s dynamic hedging model consists of a price model and a decision model:

  • The price model captures (a) the dynamic evolution of the price forward curve, (b) randomness in renewable production, and (c) spot price mean reversion and price spikes.
  • The decision model (a) anticipates future portfolio rebalancing when new contracts will become tradable, (b) accounts for varying liquidity of contracts over time, and (c) respects institutional order limits and hedge targets.

  A ready-to-use graphical user interface

The model is available as ready-to-use yet highly customizable software solution deployed through QUASAR® Cloud.

Users can import and manage input data, execute optimization runs, inspect and analyze trading strategies, create interactive charts and reports, as well as export result data and easily share it across the organization. QUASAR® Cloud can be obtained as subscription service or set up on-premise via AWS VPC. Learn more about QUASAR Cloud

  The world's most powerful stochastic programming solver

The model is driven by the powerful QUASAR® stochastic programming solver that combines the latest advancements in machine learning and mathematical optimization. QUASAR®’s highly efficient algorithms can solve the most complex stochastic-dynamic programming problems with hundreds of time stages, thousands of variables and millions of possible outcomes at an unprecedented speed. Learn more about QUASAR

Success Story

An Italian power producer uses Quantego’s dynamic hedging model to reduce exposure to market price risk and smooth out cash flows. The model advises power traders on which futures products to sell and when, and provides risk management with a lever to define a hedge plan that matches the risk strategy of the company.

What are the benefits?

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Profitability increase and risk reduction

  • Optimal timing of futures and spot trading
  • Reduce transaction cost by trading when products are most liquid
  • Diversify risk by spreading trading volumes across products and time

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Risk management and compliance

  • Follow best practices in portfolio optimization
  • Detailed disclosure of hedging decisions
  • Avoid error-prone and opaque spreadsheet calculations

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Automated monitoring and reporting

  • Trading recommendations and opportunity outlook
  • Monitoring of company’s future exposure
  • Value-at-risk and cashflow-at-risk for different hedging strategies

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Hosted on QUASAR® Cloud

  • Unify multiple models and its data on one platform
  • Customizable model and reports
  • Automate repeated optimization tasks
  • Share model output as interactive reports across the organization

More Information and Resources

Check out our blog with more resources, such as white papers, customer success stories and academic publications.

See All Resources

Interested?