Method, system and computer program product for valuating natural gas contracts using weather-based metrics

• US 7,162,444 B1
• Filed: 08/18/2000
• Issued: 01/09/2007
• Est. Priority Date: 08/18/2000
• Status: Active Grant

• Current Assignee: Planalytics, Inc.
• Original Assignee: Planalytics, Inc.
• Inventors: Machado, Roberto C. Jr., Corby, Paul M., Frech, Bruce
• Primary Examiner(s): Trammell; James P.
• Assistant Examiner(s): Winter; John M
• Application Number:
  US09/641,394
• Time in Patent Office: 2,335 Days
• Field of Search: 705/35, 705/1, 705/36, 705/37
• US Class Current: 705/35
• CPC Class Codes: G06Q 30/018 Certifying business or products
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange

Abstract

A method, system and computer program product for valuating natural gas futures and options contracts using weather-based metrics. The method and computer program product allow gas buyers and traders to make informed decision on purchasing/selling natural gas futures and futures options on a regulated exchange such as the New York Mercantile Exchange (NYMEX) based on historical and forecasted weather. The system includes weather forecast, weather history, and natural gas-related databases, as well as a trading server and several workstation clients, and provides assistance to traders in reaching complex buying/hedging decisions.

Claims

1. A computer-based method for valuating natural gas futures and options contracts using weather-based metrics, comprising the steps of:

(1) receiving, via a graphical user interface, an input from a user indicative of a number of monthly gas contracts desired for a period of time;

(2) receiving, from a first database stored in a memory, historical weather information for at least one basket of cities during said period of time;

(3) receiving, from a second database stored in said memory, future weather information for said at least one basket of cities during said period of time;

(4) receiving, from a third database stored in said memory, historical natural gas inventory information for said at least one basket of cities during said period of time;

(5) receiving, from a fourth database stored in said memory, historical gas futures contract price information for said period of time;

(6) applying, at a server, a series of regression analyses to obtain a predicted baseline value for each of the monthly gas contracts within said period of time using said received historical weather information, said future weather information, said historical natural gas inventory information, and said historical gas futures contract price information;

(7) receiving, from a data feed, live exchange data which indicates a current price for each of the monthly gas contracts within said period of time;

(8) applying, at said server, a series of recommendation rules to said predicted baseline value, using said received live exchange data; and

(9) providing, via said graphical user interface, said user with a recommendation for each of the monthly gas contracts within said period of time, wherein said recommendation reflects said input from said user indicative of said number of the monthly gas contracts desired for said period of time.

2. The method of claim 1, wherein said series of regression analyses applied in step (6), comprises the steps of:

(a) performing, at said server, a linear regression of said historical weather information and said historical natural gas inventory information; and

(b) performing, at said server, a multi-variate regression of said historical gas futures contract price information, said historical weather information and said historical natural gas inventory information.

3. The method of claim 1, wherein said series of recommendation rules provided in step (8) includes at least one of the following:

(i) Strong Buy;

(ii) Buy;

(iii) Buy a Call;

(iv) Write a Put;

(v) Sell; and

(vi) Strong Sell.

4. A system for valuating natural gas futures and options contracts using weather-based metrics, comprising:

a weather history database that stores historical weather information for at least one basket of cities;

a weather forecast database that stores future weather information for said at least one basket of cities;

an inventory database that stores historical natural gas inventory information for at least said at least one basket of cities;

a price database that stores historical natural gas futures prices information;

at least one workstation that allows a user to specify inputs that affect a value of the natural gas futures and options contracts; and

at least one trading server, responsive to said at least one workstation and connected to said weather history database, said weather forecast database, said inventory database, and said price database, that applies a pricing model to valuate the natural gas futures and options contracts using said specified inputs from said user;

whereby the system provides assistance to said user in reaching buying/hedging decisions in trading the natural gas futures and options contracts.

5. A computer program product comprising a computer usable medium having computer readable program code means embodied in said medium for causing an application program to execute on a computer that performs valuations of natural gas futures and options contracts using weather-based metrics, said computer readable program code means comprising:

first computer readable program code means for causing the computer to receive an input from a user indicative of a number of monthly gas contracts desired for a period of time;

second computer readable program code means for causing the computer to receive historical weather information for at least one basket of cities during said period of time;

third computer readable program code means for causing the computer to receive future weather information for said at least one basket of cities during said period of time;

fourth computer readable program code means for causing the computer to receive historical natural gas inventory information for said at least one basket of cities during said period of time;

fifth computer readable program code means for causing the computer to receive historical gas futures contract price information for said period of time;

sixth computer readable program code means for causing the computer to apply a series of regression analyses to obtain a predicted baseline value for each of the monthly gas contracts within said period of time using said received historical weather information, said future weather information, said historical natural gas inventory information, and said historical gas futures contract price information;

seventh computer readable program code means for causing the computer to receive live exchange data which indicates a current price for each of the monthly gas contracts within said period of time;

eighth computer readable program code means for causing the computer to apply a series of recommendation rules to said predicted baseline value, using said received live exchange data; and

ninth computer readable program code means for causing the computer to provide said user with a recommendation for each of the monthly gas contracts within said period of time, wherein said recommendation reflects said input from said user indicative of said number of the monthly gas contracts desired for said period of time.

6. The computer program product of claim 5, wherein said sixth computer readable program code means comprises:

tenth computer readable program code means for causing the computer to perform a linear regression of said historical weather information and said historical natural gas inventory information; and

eleventh computer readable program code means for causing the computer to perform a multi-variate regression of said historical gas futures contract price information, said historical weather information and said historical natural gas inventory information.