ZEMA Handles Forward Curve Extrapolation with Ease
ZEMA is a superior data management solution that provides its users with easy access to an extensive data library. ZEMA offers powerful and easy-to-use tools to collect, validate, and analyze large quantities of data in one centralized place. ZEMA’s analyses can then be easily integrated with downstream systems. One of the most sought-after functionalities of ZEMA is forward curve extrapolation. Although forward curve analysis can be a particularly daunting task for many traders, analysts, and risk managers, it can be performed in ZEMA easily with only a few clicks. ZEMA’s extrapolation functionality allows users to take an existing data series and extend it far into the future based on the shape and trend of available historical data. Series options can be combined with custom formulas, offering ZEMA users control over the exact calculation of each extrapolation. When extrapolating a curve, users can choose to increment by a set value or a percentage, by using a number of previous values, by trend line, and more.
- Figure 1: Henry Hub Natural Gas Futures (NYMEX)
Figure 1 demonstrates how traders can use ZEMA to determine Henry Hub natural gas prices until 2032. This was done in the example above by extrapolating a curve according to its trend line and applying its historical shape. This example was generated using NYMEX Henry Hub natural gas futures that go up to 2027. A forward curve was created using a settlement date of March 8, 2014. To extrapolate this forward curve to 2032, ZEMA’s extrapolation functionality was used to repeat the last 12 average settlement prices of the monthly contracts before applying a linear trend line, which was generated by a linear regression formula from ZEMA’s Formula Library.
The depth of analytic options in ZEMA and its intuitive interface allow both experienced and novice users to create and manage such complicated analysis with ease. Book a complimentary demo today to find out what ZEMA can do for you.