Message-ID: <781681.1075840797329.JavaMail.evans@thyme> Date: Mon, 9 Apr 2001 02:01:00 -0700 (PDT) From: vkaminski@aol.com To: vkamins@enron.com Subject: Fwd: estimating tail of distribution and additional ri Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: VKaminski@aol.com X-To: vkamins X-cc: X-bcc: X-Folder: \vkamins\VAR X-Origin: KAMINSKI-V X-FileName: vincent kaminski 1-30-02.pst Return-Path: Received: from rly-ye04.mx.aol.com (rly-ye04.mail.aol.com [172.18.151.201]) by air-ye04.mail.aol.com (v77_r1.37) with ESMTP; Fri, 06 Apr 2001 18:55:49 -0500 Received: from postmaster.enron.com (outbound5.enron.com [192.152.140.9]) by rly-ye04.mx.aol.com (v77_r1.36) with ESMTP; Fri, 06 Apr 2001 18:55:04 2000 Received: from mailman.enron.com (mailman.enron.com [192.168.189.66]) by postmaster.enron.com (8.8.8/8.8.8/postmaster-1.00) with ESMTP id WAA09923 for ; Fri, 6 Apr 2001 22:55:03 GMT From: Vince.J.Kaminski@enron.com Received: from nahou-msmsw01px.corp.enron.com (nahou-msmsw01px.corp.enron.com [172.28.10.37]) by mailman.enron.com (8.10.1/8.10.1/corp-1.05) with ESMTP id f36Mt3L12194 for ; Fri, 6 Apr 2001 17:55:03 -0500 (CDT) Received: from ene-mta01.enron.com (unverified) by nahou-msmsw01px.corp.enron.com (Content Technologies SMTPRS 4.1.5) with ESMTP id for ; Fri, 6 Apr 2001 17:54:40 -0500 Subject: Re: estimating tail of distribution and additional risk measures To: vkaminski@aol.com Date: Fri, 6 Apr 2001 17:55:06 -0500 Message-ID: X-MIMETrack: Serialize by Router on ENE-MTA01/Enron(Release 5.0.6 |December 14, 2000) at 04/06/2001 05:51:08 PM MIME-Version: 1.0 Content-type: multipart/mixed ; Boundary="0__=86256A26007DDD9B8f9e8a93df938690918c86256A26007DDD9B" Content-Disposition: inline X-Mailer: Unknown (No Version) ---------------------- Forwarded by Vince J Kaminski/HOU/ECT on 04/06/2001 05:56 PM --------------------------- Tanya Tamarchenko 03/21/2001 09:58 AM To: Naveen Andrews/Corp/Enron cc: Vince J Kaminski/HOU/ECT@ECT, David Port/Market Risk/Corp/Enron Subject: Re: estimating tail of distribution and additional risk measures (Document link: Vince J Kaminski) Naveen, the "analytical VAR" approach is working for Equity portfolio. It gives us the tool to examine the tails' behavior for this portfolio and calculate "Expected Tail Loss". The same should be done for commodities portfolio as well. Meanwhile, as we discussed, we can give some rough estimates of the losses corresponding to percentiles other than 5th. Look at the figure below. You can see VAR numbers for 5%, 1%, 0.5% and 0.1% calculated with 1) simulations (100 thousand simulations); 2) analytical VAR (gamma-delta positions representation) 1) and 2) are very close because there are not many options in Equity portfolio. 3) simulations (1000 simulations) to calculate 5% VAR. Then in order to approximately estimate VAR for 1%, 0.5% and 0.1% I scaled 5% VAR with factors corresponding to normal distribution (for example: Norminv(0.001,0,1)/Norminv(0.05,0,1) for 0.1%). The result of such extrapolation in this case is quite good (just 5% different from the correct number). We probably can use such rough estimates of tail for commodities portfolio until we have proper methods implemented. (Embedded image moved to file: pic21543.pcx) Tanya Tamarchenko 02/28/2001 01:17 PM To: Wenyao Jia/HOU/ECT, Debbie R Brackett/HOU/ECT@ECT cc: Vince J Kaminski/HOU/ECT@ECT Subject: Re: "analytical" var implementation in RisktRAC (Document link: Tanya Tamarchenko) Debbie, I am forwarding to you a 2 page document describing implementation of "analytical" VAR in RisktRAC. Here is why this effort is very important: 1. We need to calculate VAR for other percentile but 5 (1% or even 0.2% as mentioned by Rick Buy) and our simulation model can not handle required number of simulations; 2. We need to present additional risk measures (such as Mean Tail Loss) to the Board. The analytical approach is implemented in a spreadsheet and fully tested already so there will be no problems with the algorithm itself. We need to get together and discuss IT implementation. What do you think? Tanya (See attached file: Analytical_VAR.doc) - pic21543.pcx - Analytical_VAR.doc