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Enron Mail |
FYI: Option Exercise in Enpower will handle the Index Forward as follows.
Do you use the Option Exercise for any other options? -----Original Message----- From: Kroumov, Kroum Sent: Wednesday, August 22, 2001 3:29 PM To: Dunton, Heather; Yang, Zhiyun; Lee, Norman; Crooks, William Cc: Martin, Karen Y; Aldis, Laura Subject: RE: Index Option Option Exercise ver 3.0.0.24 is in P:\Powersys\stage. It should exercise Index Options to Index-Forward deals and it writes "HOUR" in term_strip_expiry_freq_cd in pwr_term_strip_rules table, so Portcalc can make difference between such an Index-Forward deal (from exercising an option) and an ordinary one. Thanks, Kroum x39980 -----Original Message----- From: Dunton, Heather Sent: Tuesday, August 21, 2001 12:07 PM To: Yang, Zhiyun; Lee, Norman; Luu, Duong; Gupta, Sanjay; Crooks, William; Kroumov, Kroum Cc: Postlethwaite, John; Chang, Fran; Law, Samantha; Warner, Nicholas Subject: Index Option We have the approval from the business unit (Matt Motley) to implement Index Option deal type as such: Index Option will be a physical option with a strike @ an Index. For a BDay option expiry the analysis will work as follows: The forward position will be valued taking the deal strip hours, these hours will be valued against the scalars - the hours in the money compared to the forward underlying price will be estimated as exercised. Only the hours in the money will be evaluated. For the day of exercise the hours evaluated will be the hours exercised in scheduling. Daily the Option Exercise function in Enpower will create an Index Forward Leg from the Index Option (expiry will be daily but the price will be hourly) @ a strike of the specified Index. Liquidation: Liquidation for the next day will be calculated using the actual exercised strip against the curve as the mid price. The True-up will be index vs curve when the index is published. This is how we would analyze each hour. The sum of each hour will be the value of the option. For each hour: HE7 = Strike = Forward Price (since Index is not available) Underlying = Forward Price * scalar Vol = Daily Vol Rate = Libor Time = same as daily (treated as a daily option for time) Vo =f(u,s,v,r,t) V = Intrinsic + Extrinsic -----Original Message----- From: Dunton, Heather Sent: Thursday, August 16, 2001 10:41 AM To: Motley, Matt Cc: Yang, Zhiyun; Lee, Norman; Luu, Duong; Gupta, Sanjay; Crooks, William; Kroumov, Kroum; Postlethwaite, John Subject: Index Option Matt I need written confirmation regarding the analysis of the new Deal Type "Index Option" for IT to implement. Index Option will be a physical option with a strike @ an Index. For a BDay option expiry the analysis will work as follows: The forward position will be valued taking the deal strip hours, these hours will be valued against the scalars - the hours in the money compared to the forward underlying price will be estimated as exercised. Only the hours in the money will be evaluated. For the day of exercise the hours evaluated will be the hours exercised in scheduling. Buy Call: Estimated Exercised hour will have a price above the mid Buy Put: Estimated Exercised hour will have a price below the mid Daily the Option Exercise function in Enpower will create an Index Forward Leg from the Index Option (expiry will be daily but the price will be hourly) @ a strike of the specified Index. Liquidation: Liquidation for the next day will be calculated using the actual exercised strip against the curve as the mid price. The True-up will be index vs curve when the index is published.
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