Price Volume (PV) Curves
PV Curve with Two Points
PV Curve is an equation of a line or curve defining the relationship between price and volume. If two or more distinct price/volume points exist, a line can be drawn to fit the data.
The equation will be in the form:
V(p) = m * p + b
where V is volume, p is price, m is the slope of the line, and b is the location where the line intercepts the Y-axis (volume). m and b will be replaced with the actual number values. With valid data, the slope should be negative, meaning volume decreases as price increases.
PV Curve with Three Points
If three or more distinct price/volume points exist, and the global setting PRC_TRY_EXPONENTIAL is true, then Servigistics will attempt to fit an exponential curve to the data. If it succeeds, the equation will be in the form:
V(p) = a * exp(-b * p)
where V is volume, p is price, a is the curve coefficient, and b relates to the sharpness of the curve. a and b will be replaced with the actual number values.
PVCurve equation can be used to determine the expected volume at any price.
Max Profit Price - Local
If an exponential equation can be computed for V(p), then the price at which maximum profit occurs can be also be computed.
Profit = (price - cost) * volume
Combining this equation with the V(p) exponential equation will yield the relationship between price and profit and volume and profit:
PmaxGP = c + 1/b
where c is cost and b is the exponent from volume curve.
If an exponential equation cannot be computed and only a linear relationship between price and volume is available, then the max profit equation is assumed to be as follows:
PmaxGP = ((c * m) - b) / (2 * m)
where c is the cost, m is the slope of the line, and b is the y-intercept.