Comments:

1.  In the sentence between eqn. 3 and eqn. 4,  I think "annualized 
volatility"  should replace "annualized standard deviation."

2.  As to the comment,  "Immediately we see something quite 
counter-intuitive."    I would disagree.   I think that its quite intuitive 
that this model should get closer to the Black-Scholes price as what is 
defined as the "jump" component becomes just part of the main price 
distribution, which happens if we define a jump to be only a 1-sigma 
event.    The table does show, however, that the results of using this model 
are very sensitive to exactly how you choose to define a "jump" (i.e. 2-sigma 
or 3-sigma... events),  and this is one difficulty in using the model in 
practice.

3.  In the paragraph after the table, I don't understand the argument about 
hedging the option.  Especially about buying a swap which would pay on the 
difference between the strike and Fs.   This seems non-sensical.

4.  I could not follow the logic of the last two sentences of the article, so 
this point should probably be explained more clearly.


--Stinson






Vince J Kaminski
08/18/2000 08:15 AM
To: Grant Masson/HOU/ECT@ECT, Stinson Gibner/HOU/ECT@ECT, Alex 
Huang/Corp/Enron@ENRON
cc:  
Subject: Alex's paper

Minor changes I made to Alex's paper.


Vince