Subject: 1st weather deal
From: [email-masked]
To: [email-masked]
Cc: [email-masked], [email-masked], [email-masked]
Date: Fri, 19 Oct 2001 09:29:10 -0700 (PDT)

Fred- Robyn structured and executed our first power deal with AIG's Arbitrage Fund yesterday- DKR.

Its our first deal.. we made money and it fit directionally into Steve Vu's book.

We have been pitching the weather product since the beginning of the year but have been limited by the size of transactions we could do and the funds understanding of the market.  Most of the funds want to use weather as a hedge for an underlying position in gas or power.. and the size of the market in weather has not been enough to cover directional NYMEX views.

So we started to look at smaller deals in the market areas to hedge regional power and gas underlyings that will naturally be smaller positions.

DEAL we did: Basket of 5 cities... equally weighted

DKR sold Nov HDD swap of basket of 5 cities: chicago, clevland, LGA, DC, Boston - equally weighted average of the 5 cities
strike = 650
payout= 2,000/HDD  with 400,000 cap.

DKR benefits if it is warm.