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Enron Mail |
Vince,
probably Frank is ready to listen to the isea of increasing the number of factors and capturing term-structure of correlations by using historical log-returns as factor loadings. Should we push for it? Tanya -----Original Message----- From: Hayden, Frank Sent: Thursday, May 10, 2001 3:01 PM To: Tamarchenko, Tanya Subject: RE: Here are the correlations.............. I guess I'm confused regarding PCA? Maybe you can explain it to me better, but I'll wholeheartedly support it if we can get correlations the way the traders are thinking. Problematically, we need this to be a huge priority because Louise Kitchen wants it implemented today, not tomorrow. For example, Fletcher is thinking the gas hedges lower his risk, and maybe they do, but not to the extent he believes?. I'll come down later and we can talk about this project, project x. Thanks, Frank -----Original Message----- From: Tamarchenko, Tanya Sent: Thursday, May 10, 2001 2:54 PM To: Hayden, Frank Subject: RE: Here are the correlations.............. Frank, this is the correlation between R6 and NG. R6 is not under EPMI-LT-NW-PR1. I referred to low correlations between NG and west power curves which I observed for recent data (NGI-SOCAL and R8, for example). To capture properly term structure of correlations we need to increase the number of factors and do joint factors analysis for all curves. This will not increase computational time or memory requirements for VAR. Tanya -----Original Message----- From: Hayden, Frank Sent: Thursday, May 10, 2001 11:58 AM To: Tamarchenko, Tanya Subject: FW: Here are the correlations.............. I had Bharat run correlations and the way he did it correlations came in around 50% for prompt and 65% further back. I want to make sure we calc it the same way. I asked Bharat to take the last 60 days of pricing, hold reference date the same. Calculate log returns. Then calculate correlations of log returns. Another method we may want to consider is using the heat rate to calc correlations which is consistent with the way they hedge. Frank -----Original Message----- From: Khanna, Bharat Sent: Thursday, May 10, 2001 9:30 AM To: Hayden, Frank Subject: Here are the correlations.............. << File: GAS PWR.xls <<
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