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SMART Forward Curves

· 4 min read
Colin Hartley

What are Smart Curves?

Smart Curves are a revolutionary new way to create your own Forward Curves.

Read on to find out how they work.

Creating Smart Curves​

Smart Curves are simply a Forward Curve with an expression applied to it.

This may seem too simple - but the power of what you can do in the expression makes this suitable for the generation of any type of Forward Curve.

Simplify!

Smart Curves are the easiest way to create Energy and Commodity Forward Curves.

Screenshot from the OpenDataDSL portal of an hourly forward curve

Advantages​

  • Simple

    A simple configuration to create Smart Curves from any Forward Curve.

  • Configurable

    Utilise any other data (Curves/TimeSeries/Scalars).

  • Powerful

    Expressions can be curve operations, built-in functions or your own custom functions.

  • Scalable

    Smart Curves are extremely lightweight and built on demand so are infinitely scalable.

  • Fast

    Smart Curves are ready as soon as the input data is updated.

  • Low Cost

    No costly processes to run to build curves - curves are built on-demand.

  • Customizable

    Create you own algorithms.

  • Hierarchical

    Smart Curves can be based on other Smart Curves.

What is the SMART Part?​

The base curve provides the dates for which the Smart Curve exists.

When a Smart Curve Date is requested for the first time, the expression is evaluated, and a Forward Curve is built. Each subsequent call to the same date of the Smart Curve returns the cached Forward Curve.

Any changes to the input data for a specific date clears the cached copy of the Smart Curve for that date. Any changes to the Smart Curve configuration clears the entire cache for that Smart Curve.

More Complex Calculations​

Even though you simply use an expression to generate the curve, you can write some complex code behind the expression to create any type of Forward Curve.

More complex Smart Curves can include:

  • An optional custom script name containing user definable functions
  • Optional references to other curves or data used in the expression

You write the custom functions in ODSL Scripts and upload them to the database. The following function creates a time spread curve:

/**
 * Create a curve with spreads created from the months in the 
 * input curve after bootstrapping
 *
 * @param input The input curve
 */
function timespread(input)
    boots = bootstrapCurve(input)
    timespread = Curve(input.ondate)
    last = boots.contracts[0]
    for i = 1 to boots.contracts.size - 1
        m = boots.contracts[i]
        value = m.value - last.value
        spread = Contract(input.ondate, last.tenor + "-" + m.tenor, value)
        timespread.add(spread)
        last = m
    next
end

You can then use this function in the OpenDataDSL portal, to create a time-spread curve:

Screenshot from the OpenDataDSL portal creating a smart curveScreenshot from the OpenDataDSL portal of the time-spread curve

Additional Curve Inputs​

You can add references to other Scalar, TimeSeries, Forward Curves or Smart Curves directly on the Smart Curve and reference them in the expression.

Screenshot from the OpenDataDSL portal creating a smart curve with multiple inputs

Some example expressions​

  • BASE*1.2
  • (BASE+OFFER)/2
  • bootstrapCurve(BASE)
  • TimeSpread(BASE)

Conversions​

Currency and unit conversions happen automatically. If you specify a currency and/or units on the Smart Curve, any inputs will be converted to the destination currency and units before the expression is calculated.

Screenshot from the OpenDataDSL portal creating a smart curve specifying currency and units

Testing Smart Curves​

You can create and test Smart Curves directly using ODSL code in the VSCode development environment:

// Create a smart curve
cf = SmartCurve("MYCURVE:CLOSE", "interpolate(bootstrapCurve(BASE),'BACKWARD')")

// Build a curve dynamically for a date
c1 = cf.build("2022-01-07")
print c1.contracts

Conclusion​

SMART curves have revolutionised the way we build curves by simplifying and streamlining every aspect from creation to daily operations.

Next steps​

Do you want to see this in action and see how you can benefit from OpenDataDSL?

Fill out the form below, we will contact you to arrange a personally tailored demo.

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Further Reading​