Subject: Re: Costless Collar for Hanover
From: [email-masked]
To: [email-masked]
Cc: [email-masked], [email-masked]
Date: Thu, 11 Jan 2001 01:08:00 -0800 (PST)

Bob,

Good job.

Zimin

Bob Lee@ENRON
01/11/2001 08:10 AM
To: Zimin Lu/HOU/ECT@ECT
cc:  
Subject: Costless Collar for Hanover

FYI  - looks like we've converged.

Bob
---------------------- Forwarded by Bob Lee/NA/Enron on 01/11/2001 07:04 AM 
---------------------------
From: Chris Loehr@ECT on 01/10/2001 04:50 PM
To: Ron Baker/Corp/Enron@ENRON
cc: Anne Yaeger/HOU/ECT@ECT, Ryan Siurek/Corp/Enron@ENRON, Wes 
Colwell/HOU/ECT@ECT, Bob Lee/NA/Enron@Enron 

Subject: Costless Collar for Hanover  

Ryan and I have looked at the research model and made some adjustments.  
The treasury rate at 12/28/00 was 5.127% (research uses 4.6% which probably 
takes into account the recent Fed 50 bp cut)
The maturity is 6/30/03 or 2.5 years (research uses 3 years)

Using these assumptions and a 47.2% volatility in the Bloomberg collar 
function results in a ceiling of 92 103/256 and a floor of 34 7/8.  After 
adjusting the research model for the changes above, Ryan and I got a similar 
range from the research model so we are comfortable with these numbers.

Let me know if there are any questions.

Chris
x33092

  

	Ron Baker@ENRON
	01/10/2001 10:52 AM
		 
		 To: Wes Colwell/HOU/ECT@ECT, Ryan Siurek/Corp/Enron@ENRON, Chris 
Loehr/HOU/ECT@ECT, Anne Yaeger/HOU/ECT@ECT
		 cc: 
		 Subject: Costless Collar

Attached is the updated valuation from Bob Lee in Research using the actual 
3-year historical vol. of 47.2 which results in a call strike of 97.978.  
Also, he has confirmed that the presence of the swap has no impact on the 
value of the collar.  Let me know if you have questions.  Thanks,
Ron
   
----- Forwarded by Ron Baker/Corp/Enron on 01/10/2001 10:28 AM -----

	Bob Lee
	01/10/2001 08:44 AM
		 
		 To: Andrea V Reed/HOU/ECT@ECT, Ron Baker/Corp/Enron@ENRON
		 cc: Zimin Lu/HOU/ECT@ECT
		 Subject: Costless Collar

Here's the calculation using the historical volatility.  The strike drops 
slightly.  The volatility in the calculation is the expected future 
vol;atility - looking at traded options for HC and an expected fall off in 
vol for long dated options, one could justify a vol estimate in the range 40 
- 50% for the collar.

The presence of the swap makes no difference on the collar valuation.

Bob