New correlations drop TX group VAR by $3.2MM

 -----Original Message-----
From: 	Dahlke, Andrea  
Sent:	Friday, November 02, 2001 8:53 AM
To:	Hayden, Frank
Cc:	Gilbert-smith, Doug
Subject:	RE: correlations

Frank-

Doug is actually out of the office today, but I wanted to check with you and see where we are at on the issue of revising his correlations in the VaR engine.  The VaR for the Ercot desk is $6 million today (limit of $5 million), so I know he is anxious to resolve this.

Thanks!

Andrea


 -----Original Message-----
From: 	Hayden, Frank  
Sent:	Wednesday, October 31, 2001 3:50 PM
To:	Gilbert-smith, Doug
Cc:	Evans, Casey; Dahlke, Andrea; Presley, Mike E
Subject:	RE: correlations

Doug,
Is this the same function used in Enpower's port calc?  As an aside, Mike brought up a point that the correl excel function is using actual prices, similar to calc'ing pnl using price instead of price change?seems like "correl" should be operating off second layer of data, ie. log returns or price changes?(variance, covariance)  

Out of due diligence, we should confirm that this is not the same function/operation utilized by valuation engine?(let's cross fingers)

Please keep me posted.
Thanks,
Frank



 -----Original Message-----
From: 	Gilbert-smith, Doug  
Sent:	Wednesday, October 31, 2001 2:27 PM
To:	Hayden, Frank; Presley, Mike E
Cc:	Dahlke, Andrea; Evans, Casey; Presto, Kevin M.
Subject:	correlations

 << File: Doug_Correlation_103101.xls >> 

Here are the correlations for selected term structures. Please feel free to ask for further info if necessary. Based on this, it looks like moving the correlations closer to 70-80% would be prudent while still being conservative.

Thanks,

Doug