Enron Mail

From:zimin.lu@enron.com
To:kenneth.parkhill@enron.com
Subject:Storage model change: Commodity Delta
Cc:stinson.gibner@enron.com
Bcc:stinson.gibner@enron.com
Date:Wed, 10 Jan 2001 07:49:00 -0800 (PST)

Dear All,


I change the storage model output to its total value versus the unit value
before.
The total value refers to the total present value of the storage capacity at
given
status (initial conditions).

The way I calculate the unit value is

(Total PV - S*capacity taken)/total capacity

which could suffer some negative numbers since S, the spot price could be
very high. The correct way is to define the S as the average injection gas
price, but
this would be troublesome to compute.

By switching to total PV, the delta can be interpreted as total commodity
delta for the
hedge. Actually, Duffie also suggested using the total PV as the output in
his audit
review.

I have attached the XLL model below.

Zimin