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Enron Mail |
Paul,
Vince and I spent some time thinking about the diligence process for the trading analytics. There is a limited amount that can be accomplished in a two day time period. I think a reasonable start would be the following: 1. Obtain an audited history of the trading strategies which have been implemented in order to verify profitability, and P/L volatility of each. 2. Review needed working capital and risk capital requirements and compare these to projections for trading income. 3. Review current level of access to electronic markets and verify that a change of ownership would not have adverse consequences, i.e. are there guarantees of continued access using the current systems? 4. Review feasibility of entry into proposed new markets? It is far from clear that there will be any synergy with most commodity markets given the current limited "electronic" liquidity. 5. Review, at least qualitatively, the current trading strategies being used. Try to develop some estimate of how fast the profitability of these strategies will disappear as other's implement similar trading models. What is the trade off between trade quantity and slippage. 6. Review the methodology used to generate new trading strategies which will be needed to replace the current models as they become unprofitable and outdated. 7. Try to determine if there will be any value in transfer of trading technology to Enron's other markets, given the illiquidity of these markets as compared to the financial equity markets. If there were a sufficiently long time horizon for our analysis, we would probably want to run their system on a test set of data. Let me know if you have other suggestions. --Stinson
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