Message-ID: <29353772.1075849661413.JavaMail.evans@thyme>
Date: Mon, 9 Apr 2001 11:18:00 -0700 (PDT)
From: jeremy.wong@enron.com
To: john.griffith@enron.com
Subject: Vega Issue - Vol. Smile
Cc: errol.mclaughlin@enron.com, dave.wei@enron.com
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John:

The reason for the large Vega numbers on the TopPage report, while there were 
no corresponding changes in the Volatility curves, is due to the change in 
the mid. price for the current day versus the prior day. The corresponding 
volatility skews that are added to the vols. for the 2 days is causing the 
large vega numbers.

For example, for deal number QV5087.2 (exp. date 01-Jan-2002):

  Current Day  Prior Day
Mid. Price 5.885   5.772
Strike Price 3.5   3.5
Mid - Strike 2.385   2.272
Vol.  0.555   0.555
Vol. Skew 0.03816   0.03635
Actual Vol. 0.59316   0.59135

Option value for prior day using current day's vol. =  7,616,935  
Option value for prior day using prior day's vol.     =  7,547,238 
Vega                =  69,697

Thank you,
Jeremy
x3-0573