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Enron Mail |
Hey Jim,
While I was out on vacation last week, Patrick unwound some positions that brought Westpark onto the radar screen. Not having my understanding or knowledge of this relationship, the credit analyst looking at the trades asked the market risk to run a 5-day VAR. Excluding December, the open position (which later was completely unwound) had positive 5-day VAR that exceeded the collateral being held, i.e. $1.5MM. Because Patrick did eventually close out his position while deep in the money, their is no credit risk on any of his business. However, combing the volatile nature of this price environment (prompt, gas daily being so dramatic), large volumes, and one sided nature of trading, we are now uncomfortable with the $300M/Bcf rule. Until the market calms a bit, what was once quoted as $300M for each Bcf open, is now $1MM for each Bcf open. This collateral to be posted upfront. By increasing this multiple, we should easily be able to stay within the 99th percentile of probable VAR. Please communicate this strategy to Patrick and let me know if you would like to schedule a meeting to further discuss. thanks brant
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