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Enron Mail |
We are proposing the following changes to the calculation of NG correlations:
1. weight the data set (3 calendar months) used in calculating correlations (most recent data weighed heavier) 2. use respective contract prices, instead of prompt month prices (i.e. for Nov-00 correlations use Nov contract prices for the last 3 months, as opposed to prompt month prices for the last three months. Tanya, I have confirmed with Ted and he gave us green light to make both changes. Did we get an opinion from Vince? Winston, It is my understanding, that this changes apply to NG correlations only, not the correlations between commodities. We will test the changes in gas and then decide on world-wide implementation. Any estimate on timing of this implementation? Cassandra, Ted suggested that you and Veronica should document this as a change in VaR parameters and inform all commercial desk heads of these changes. We intend to make them for NA gas first, but ultimately make these changes consistent across all commodity groups. Let me know if you have questions. Thanks, Vlady. Wenyao Jia 10/13/2000 03:43 PM To: Vladimir Gorny/HOU/ECT@ECT cc: Tanya Tamarchenko/HOU/ECT@ECT, Jin Yu/HOU/ECT@ECT Subject: Re: VAR calibration issues Vlady, Also in the meeting, we identified that there are still some issures regarding to the correlation matrix calculations. Since different commodity has different expiration dates. When calculate correlation between two commodities, the two may have different prompt months. Are we going to use prices on two different prompt months OR are we going to use the prices on the SAME month disregarding prompt months. Because above issues, Jin is not going do any changes on the correlation matrix calculation until above issures can be solved. Thanks! Winston Tanya Tamarchenko 10/13/2000 03:16 PM To: Vladimir Gorny/HOU/ECT@ECT cc: Wenyao Jia/HOU/ECT@ECT, Jin Yu/HOU/ECT@ECT, Jin Yu/HOU/ECT@ECT Subject: Re: VAR calibration issues Vlady, we met with Winston and Jin today regarding VAR calibration issues. The outcome on this discussion is: 1. Jin will put weights into calculation of factor loadings; 2. Jin will change the way factor loading are calculated. For each commodity the prompt month contract will be selected for the effective date of vatrfacs run. Then the historical prices will be collected for 3 month for all forward contracts starting from selected prompt month contract. The variance-covariance matrix will be calculated based on these data, it will be converted into correlation matrix, then factor loadings analysis will be performed on the correlation matrix. Tanya.
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