Message-ID: <10484064.1075856527498.JavaMail.evans@thyme> Date: Tue, 9 Jan 2001 06:30:00 -0800 (PST) From: vince.kaminski@enron.com To: denise.furey@enron.com Subject: Re: Cc: vince.kaminski@enron.com, vasant.shanbhogue@enron.com Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit Bcc: vince.kaminski@enron.com, vasant.shanbhogue@enron.com X-From: Vince J Kaminski X-To: Denise Furey X-cc: Vince J Kaminski, Vasant Shanbhogue X-bcc: X-Folder: \Vincent_Kaminski_Jun2001_4\Notes Folders\'sent mail X-Origin: Kaminski-V X-FileName: vkamins.nsf Denise, No problem. We shall prepare a short presentation to address these issues. Vince Kaminski Denise Furey@EES 01/09/2001 11:12 AM To: Vince J Kaminski/HOU/ECT@ECT cc: Subject: I hope you have seen the email below. Do you have any problem with what Jeremy has asked you or your group to address. Is there anything that you want us to supply to you to assist you? ---------------------- Forwarded by Denise Furey/HOU/EES on 01/09/2001 11:11 AM --------------------------- Denise Furey 01/08/2001 11:46 AM To: Gayle W Muench/HOU/EES@EES, Michael Tribolet/Corp/Enron@Enron, William S Bradford/HOU/ECT@ECT, Vince J Kaminski/HOU/ECT@ECT, Vasant Shanbhogue/HOU/ECT@ECT cc: Don Black/HOU/EES@EES, Tony Spruiell/HOU/EES@EES Subject: I believe all of you received a request from Jeremy Blachman to hold the afternoon of January 10th open for an off-site to discuss the manner in which RAC and Research assess/test the credit quality of EES transactions. I realize that RAC and EES have had many discussions as to the methodology, but it might be helpful for all of us to understand the actual derivation of some of analysis. Please call me with any questions or comments at ext # 30349. The agenda will be as follows: 12:00 - 1:00 Lunch 1:00 - 3:30 Presentations 3:30 - to close Discussion RAC/Research Presentations The following topics would be of interest to EES: 1 - The derivation of default probabilities including (Research) - - a discussion of the actual mathematical process, - - the analytics behind why these computations are deemed the best for Enron, - - a comparison to historic default rates and why they differ (in respect to actual default rates, shape of the cumulative default curves etc. 2 - The volatilities which are used to determine possible loss scenarios for the commodity portion of EES deals including (Research) - - the selection of curves - - the application of those curves to the actual credit reserve model and - - why these particular tests are applicable to our products. 3 - The recovery rates used in the credit reserve model. How are these figures derived? (RAC) 4 - How RAC and Research have adjusted the credit reserve model to accommodate unusual aspects of the deal including (RAC) - - promotion payments, - - accounts receivable - - committed capital - - and other factors EES also understands that some of you may be familiar with our processes, however, there are perhaps areas that you would like to understand more fully. Please tell us what you would like to hear from us. Also, RAC has sent us the credit reserve model and I have seen completed models. Perhaps prior to our meeting on Wednesday, someone from RAC and/or Research could sit with me and someone from Phil Layton's group and go through the process of how the various pieces are put together.