-----Original Message-----
From: 	Tamarchenko, Tanya  
Sent:	Thursday, May 17, 2001 4:01 PM
To:	Kaminski, Vince J
Subject:	Power VAR- comments on Winton's document

Vince,

1) I agree with paragraphs 1 and 2 in Winton's document (re-running jumps and clustering and correlations of jumps).

2) Regarding 3 (fixing instability in volatilities) I would suggest implementing volatilities smoothing (see short document attached)
 
3) Also: regarding correlations. The analysis I did was showing that correlations on fixed contracts prices are much more
consistent, have less noise versus prompt, promt+1, etc prices correlations (remember those pictures?). I was suggesting
to switch to those. IT implemented this in some version a while ago, but since they don't use version control environment properly
I am not sure they still have it. This will allow us to capture also the correlations across gas and power (I experimented with NG-R6 correlations) at least for 2 prompt years. 

4) We need to ask IT to increase the number of columns in the database table which holds factors from 7 to 100. Then we (Research)
can experiment with joint factor analysis to capture term-structure of correlations across curves.

Tanya