Message-ID: <27343688.1075863711046.JavaMail.evans@thyme>
Date: Fri, 14 Jul 2000 11:27:00 -0700 (PDT)
From: john.arnold@enron.com
To: frank.hayden@enron.com
Subject: Re: Re Larry May - REVISED
Cc: susan.scott@enron.com, dutch.quigley@enron.com, jeffrey.gossett@enron.com
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Frank:
Susan Scott, Larry's risk manager, will compile and send you a spreadsheet of 
total p&l minus new deal p&l since June 1.   Can you review this data and 
compare it to the respective VAR numbers for these dates.  I think you will 
see the VAR numbers way overestimate his p&l volatility.
John


   
	Enron North America Corp.
	
	From:  Frank Hayden @ ENRON                           07/14/2000 05:17 PM
	

To: John Arnold/HOU/ECT@ECT
cc:  
Subject: Re Larry May - REVISED


John,
I apologize for the delay in responding, I was in class today.
We are having difficulty backtesting Larry May's VaR.   It looks as if during 
the month of June, the book administor  loaded the spreadsheets into ERMS but 
assigned multiple master deal ID's.  (the code is "NG-OPT-XL-PRC")
For example Larry May is showing the following during the month of June: 
June 1st  $797 million dollars loss
June 2nd +192 million dollars made
June 5th $300 million dollars made... (etc..)

This problem makes it impossible to backtest....

Second, regarding a different approach, the immediate solution was the 
allocation of an additional $5 million dollars of VaR, thereby temporarily 
increasing your limit to $45 million.  This limit increase is in effect until 
July 26th.  The game plan is that during this time period, a better solution 
can be devised..... 

I hope this helps.
Thanks,
Frank


 



John Arnold@ECT
07/14/2000 02:33 PM
To: Frank Hayden/Corp/Enron@Enron
cc:  

Subject: 

Frank:
Just following up on two topics.
One: Larry May's book continues to run at a VAR of 2,500,00 despite the fact 
his P&L is never close to that.  Can you check that his exotics book 
positions are being picked up in his VAR calcs.

Second:  Have you looked into applying a band-aid to the understating longer 
term Vol problem until we change formulas?

John