THE SOLUTION – REAL-TIME PRICING
Leveraging on the large amount of data that the platform captures, ENGINE has the ability to assess and report market movements as they occur, sparing market participants the need to relay on indexes that, at best, capture the market that occurred rather than the one that is happening.
On ENGINE, actual transactions are captured as they occur, information is anonymized and made available in real time so other users can form a judgement on how the market is behaving and adjust their decision making accordingly.
One of the outputs of this process is ENGINE’s Live Price Assessment (LPA).
LPA – REAL DATA, TRANSPARENT PROCESS
LPA strength stems from two pillars: relevant data and a real-time processing.
All real transactions are captured and fed into the LPA’s model to assess the price at a given point in time at a certain port. Other references are considered such as commonly used price benchmarks and crude movements but most of the weight in LPA’s processing goes to ENGINE’s proprietary data. Importantly, to ensure an unbiased assessment, no “editorial judgement” is made to the output and prices are displayed as they are calculated.
Sometimes, at a given point in time and particular port no actual transactions may have taken place just recently. This is when crude movements come in as a handy stream of information in the LPA’s model, allowing it to adjust to relatively recent price points by the latest developments in the oil market. ENGINE’s LPA factors in Brent, WTI spot and forward prices produce these adjustments.
Key to LPA’s accuracy is its ability to adaptatively adjust the relevance of the different pricing data points, in function of when they were produced. The algorithm combines an exponential weighting function with a waterfall mechanism to adjust the weight each data point is given in the price calculation, mimicking the natural judgment an expert would do, assigning more weight to more recent transactions and more relevance to firmer data sources.