Subject: RE: Request for Assistance from Risk Magazine
From: [email-masked]
To: [email-masked]
Cc: [email-masked]
Date: Mon, 16 Jul 2001 10:02:14 -0700 (PDT)

Paolo,

I shall be very glad to help you.

Vince Kaminski

 -----Original Message-----
From: 	"Paolo Cadoni" <[email-masked]>@ENRON [mailto:IMCEANOTES[email-masked]] 
Sent:	Monday, July 16, 2001 11:18 AM
To:	[email-masked]
Subject:	Request for Assistance from Risk Magazine

Dear Dr. Kaminski

My name is Paolo Cadoni and I work for Risk Magazine in London.  I am
contacting you to request your assistance. We have recently had a very
interesting paper submitted for publication, entitled: "Let's Swing Again
(Pricing Non-Storable Commodity Options)".  I would very much like you to
act as an anonymous referee for this submission, if it is not too much
trouble.

Keypoints:
An expectation model with permanent and temporary shocks has been developed
and used to price a swing option (capacity reservation option) on a
non-storable commodity. The model is a hybrid of a permanent shock (binomial
tree) and temporary shock model (reminiscent of Black (1976)). The
flexibility offered by the model's hybrid nature allows it to capture the
empirical behaviour of electricity and gas prices: transient spot price
shocks and calibration  to the futures prices and the futures volatility
term structure.  As the size of the volatility of the temporary shocks is
increased the component of the swing option priced derived from the
temporary shocks quickly dominates the component from the binomial model.
Therefore, a failure to model the transient shocks when pricing swing
options may present a serious modelling error.

I do hope that you are able to help us out. If you are in agreement, I can
email you the paper immediately - we would need the report emailed to us
within around four weeks. Please get in touch as soon as possible.

Many thanks for your time and consideration.

Best regards,

Paolo Cadoni

__________________________________________________________
Dr Paolo Cadoni
Technical Assistant, Risk Magazine
Risk Waters Group
Haymarket House                         e-mail: [email-masked]
28-29 Haymarket                          Tel.: +44 (0)20 7484 9804
London SW1Y 4RX                       Fax: +44 (0)20 7930 2238

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