Volume 2 — Governance and ControlsGovernance and Controls © Copyright 2002, All rights reserved 22 Best Practices and Controls • For all active positions, each forward curve should be developed and owned by only one person unless precluded by regulations. • The forward price curve should be developed using market prices for liquid commodities/markets/products and modeled for illiquid commodities/markets/products. • Volatility curves should be modeled for open positions in illiquid markets implied volatility curves should be developed for actively traded options. • Correlation curves should be developed using historical forward curve correlations and other relevant market data. • Specific liquid commodities/markets/products curves should be updated at least once a day, within one hour of market close. Other curves should be updated as markets change. • A formal valuation methodology should be established for developing each curve and related sources of information. • While price discovery is usually performed by the front office in both market and non- market years, it should be validated by the middle office. Key Reports • Price discovery reports (e.g., broker quotes, electronic trading platforms, data feeds). • Price curves. 1.1.5 Deal Entry Process Overview Upon completion of a deal, the dealmaker should ensure that the terms of the deal, broken out by individual risk components, are entered into the deal capture system. This should be done no later than the close of business on the date of execution so that those downstream (scheduling, risk management, accounting, etc.) can understand the deal and perform their tasks accordingly. The actual data entry can be performed by the dealmaker, front office support, or other designee. If someone other than the dealmaker enters the terms into the system, the dealmaker must review the activity to ensure accurate and timely entry. Objectives • Capture deal terms in the system for proper management. • Establish procedures that ensure complete, accurate, and timely deal entry. Best Practices and Controls • All telephone-initiated deals should be executed on a recorded line.