Message-ID: <27427237.1075857589306.JavaMail.evans@thyme>
Date: Tue, 26 Sep 2000 12:26:00 -0700 (PDT)
From: john.arnold@enron.com
To: frank.hayden@enron.com
Subject: Re: Stress Test
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I'm not sure what is happening on my position.  It may have to do with how 
you shaped the forward vol and price curves at each level.  My VAR is so 
dependent on spread levels and vols that a small change in the Jan vols could 
produce that effect.  
The results certainly provide evidence of a need for higher VAR going into 
the winter.
John


   
	Enron North America Corp.
	
	From:  Frank Hayden @ ENRON                           09/15/2000 06:32 PM
	

To: John J Lavorato/Corp/Enron@Enron, John Arnold/HOU/ECT@ECT
cc: Vladimir Gorny/HOU/ECT@ECT, Sunil Dalal/Corp/Enron@ENRON 
Subject: Stress Test

The below file shows the results of the two stress test requested.  Under the 
$7 dollar stress, NYMEX curve was shifted to $7 dollars with all other price 
curves proportionally shifted.  Under the $9 dollar test, not only were the 
price curves shifted, but volatilites were stressed as well with NYMEX 
volatility going to 100% and all other vol locations being raised accordingly.


Key findings include:
$7 dollar stress only raised VaR by 79%  
$9 dollar stress raised VaR by 134% 

       

It is interesting to note that with the seven dollar stress, VaR on the 
financial desk actually decreased.  This would seem to imply that up to the 
seven dollar strike, the financial desk is long gamma (which overall reduces 
risk).  But between the seven dollar and nine dollar strike, it appears that 
the desk becomes short gamma, thereby acceralatering the amount of risk and 
increasing VaR by 74%.  Does this make sense or is something else happening?

Frank






---------------------- Forwarded by Frank Hayden/Corp/Enron on 09/15/2000 
03:43 PM ---------------------------
   
	
	
	From:  Sunil Dalal                           09/15/2000 02:54 PM
	

To: Vladimir Gorny/HOU/ECT@ECT, Frank Hayden/Corp/Enron@Enron
cc:  

Subject: Lavo/Arnold Stresses

Attached below are the $7 and $9 stresses that were run at the request of 
Lavo ($7) and Arnold ($9).  I ran the results against the AGG-IV portfolio.