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Enron Mail |
Frank:
Susan Scott, Larry's risk manager, will compile and send you a spreadsheet of total p&l minus new deal p&l since June 1. Can you review this data and compare it to the respective VAR numbers for these dates. I think you will see the VAR numbers way overestimate his p&l volatility. John Enron North America Corp. From: Frank Hayden @ ENRON 07/14/2000 05:17 PM To: John Arnold/HOU/ECT@ECT cc: Subject: Re Larry May - REVISED John, I apologize for the delay in responding, I was in class today. We are having difficulty backtesting Larry May's VaR. It looks as if during the month of June, the book administor loaded the spreadsheets into ERMS but assigned multiple master deal ID's. (the code is "NG-OPT-XL-PRC") For example Larry May is showing the following during the month of June: June 1st $797 million dollars loss June 2nd +192 million dollars made June 5th $300 million dollars made... (etc..) This problem makes it impossible to backtest.... Second, regarding a different approach, the immediate solution was the allocation of an additional $5 million dollars of VaR, thereby temporarily increasing your limit to $45 million. This limit increase is in effect until July 26th. The game plan is that during this time period, a better solution can be devised..... I hope this helps. Thanks, Frank John Arnold@ECT 07/14/2000 02:33 PM To: Frank Hayden/Corp/Enron@Enron cc: Subject: Frank: Just following up on two topics. One: Larry May's book continues to run at a VAR of 2,500,00 despite the fact his P&L is never close to that. Can you check that his exotics book positions are being picked up in his VAR calcs. Second: Have you looked into applying a band-aid to the understating longer term Vol problem until we change formulas? John
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