re : ebs var transaction policy i have two things biting me .
first is time . i need to turn a draft for hannon and rice asap . so , the
value of a deliberative approach to coming up with a v @ r policy will quickly
evaporate if we take 2 weeks to study what the policy should say .
second , i have a unique situation . our concept of v @ r is really unlike the
rest of enron ' s today . what happens today is that network engineers
unilaterally make decisions about deployment , configuration and other matters
which effect the longs and shorts of our asset / contract portfolio that they
view strictly from a network operating standpoint .
a good example was a decision to move our primary terapop ( three large
servers storing 165 gigabytes each ) from portland to la . the servers are
already in place and purchased , so no capital was involved . but the
decision has huge ramifications on the future la / new york and other bandwidth
usage , and that cost money . now it could be that the la / new york cost is
cheaper than the portland / new york cost , the whole point is no one knows .
what our " value - at - risk " policy attempt to corral is these types of decisions
and put them into the hands of the risk management group , where the decision
will be made with at least some economic work behind it .
i really see the ebs v @ r policy to be misnamed , since we don ' t really have
the math done to calc v @ r . it really is a volumetric - based control policy
that says you can ' t make network changes over xx amount of megabytes ( a
storage measure ) or oc - 3 equivalents ( a bandwidth measure ) without risk
management making or approving the decision . i do believe that with
research ' s help , we can in time actually calculate the v @ r impact of such
decisions . at that time , the policy should be modified to set metrics based
on the v @ r calculations .
so if you have an open enough mind to let us co - op your word for a minute ,
we need to start turning the minds of the network industry people into
thinking about their decisions as having value effects . said directly ,
kevin hannon has given me authority to write a policy to move control over
significant network changes from the field to the trading floor , and i am
going to issue something now to effectuate that . . . . . .
so . . . i really want your views on what we are doing , but thought you needed
some flavor and an sense of the urgency . if you can weigh in , do so
quickly . . . . .
barry pearce
06 / 30 / 00 04 : 47 am
to : john echols / enron communications @ enron communications , lou casari / enron
communications @ enron communications
cc :
subject : re : ebs var transaction policy
positive . . . .
- - - - - forwarded by barry pearce / enron communications on 06 / 30 / 00 04 : 49 am
- - - - -
ted murphy @ ect
06 / 29 / 00 11 : 33 am
to : barry pearce / enron communications @ enron communications @ enron
cc :
subject : re : ebs var transaction policy
barry ,
conceptually , i see no reason that a process like this can not be
implemented . in some way we have attempted to do so through the enron corp
transaction approval process ( tap ) . i have forwarded to john a copy of this ,
along with the risk management policy . i ' ll let him share with you if ok ( i
really don ' t want to act as the firm ' s in - house kinko ' s ! ! ) . we have taken
the first step and done poorly on follow - up steps to create a very easy to
follow process for anything other than direct funded capital . however , some
process around a greater number of assets / deals is better than none . i
agree that i have not seen a really good fully baked one implemented , but i
think it is wrong not to try .
the only concerns i have is that , given that we want to have " standard "
metrics and approval processes around the firm , ebs creates a process / metric
which is complementary to and integrates with processes / metrics that the
other business units are subjected to .
ted
barry pearce @ enron communications
06 / 29 / 2000 09 : 09 am
to : stinson gibner / hou / ect @ ect , dale surbey / lon / ect @ ect , ted
murphy / hou / ect @ ect
cc : lou casari / enron communications @ enron communications , john echols / enron
communications @ enron communications , jim fallon / enron communications @ enron
communications
subject : ebs var transaction policy
hey you guys ,
we are trying to implement a ' var transaction ' policy - and would like your
opinion .
this is going to be tough - because i ' m not sure we have implemented a
similiar policy across any of our other ' books ' - that is - we looking to
bring in all the accrual / operational assets as well as the mtm stuff
( lambdas ) . to have a real - live ' configuration ' of the system .
if assets / routes / servers etc . . . are added - what is the impact on the ' value '
of the system and what it ' s worth .
john has attached a draft below - for your review and thoughts .
i can see how this works in a trading environment - when you actually know
the var of your whole trading portfolio . however - i ' ve not seen this done
with a mixture of mtm & accrual assets . add the spice of a ' operational
system ' valuation - and this will be tough to quantify and model .
step 1 - configure system and value it
step 2 - calculate a var on this . we will need to do some work here !
step 3 - calculate the incremental var of new deals / amendements / reconfigs etc
- tough . . . .
see what you think ?
b .
john echols
06 / 28 / 00 05 : 41 pm
to : jim fallon / enron communications @ enron communications , barry pearce / enron
communications @ enron communications , lou casari / enron communications @ enron
communications
cc :
subject : policies
here is a first rough draft of a " value @ risk " transaction policy .
i would like you to start looking at where we are going on the policy and get
some early thinking going on limits for the v @ r . for example , should we
effectively shut down all server relocations without approval , or allow some
level of mb of storage to be moved around or reconfigured ?
i need some commercial and industry realism for this . we may need rick
paiste or your industry helpers ( marquardt , etc . to help us ) .
barry , lou , i need your input .
re : ebs var transaction policy
i have two things biting me .
first is time . i need to turn a draft for hannon and rice asap . so , the
value of a deliberative approach to coming up with a v @ r policy will quickly
evaporate if we take 2 weeks to study what the policy should say .
second , i have a unique situation . our concept of v @ r is really unlike the
rest of enron ' s today . what happens today is that network engineers
unilaterally make decisions about deployment , configuration and other matters
which effect the longs and shorts of our asset / contract portfolio that they
view strictly from a network operating standpoint .
a good example was a decision to move our primary terapop ( three large
servers storing 165 gigabytes each ) from portland to la . the servers are
already in place and purchased , so no capital was involved . but the
decision has huge ramifications on the future la / new york and other bandwidth
usage , and that cost money . now it could be that the la / new york cost is
cheaper than the portland / new york cost , the whole point is no one knows .
what our " value - at - risk " policy attempt to corral is these types of decisions
and put them into the hands of the risk management group , where the decision
will be made with at least some economic work behind it .
i really see the ebs v @ r policy to be misnamed , since we don ' t really have
the math done to calc v @ r . it really is a volumetric - based control policy
that says you can ' t make network changes over xx amount of megabytes ( a
storage measure ) or oc - 3 equivalents ( a bandwidth measure ) without risk
management making or approving the decision . i do believe that with
research ' s help , we can in time actually calculate the v @ r impact of such
decisions . at that time , the policy should be modified to set metrics based
on the v @ r calculations .
so if you have an open enough mind to let us co - op your word for a minute ,
we need to start turning the minds of the network industry people into
thinking about their decisions as having value effects . said directly ,
kevin hannon has given me authority to write a policy to move control over
significant network changes from the field to the trading floor , and i am
going to issue something now to effectuate that . . . . . .
so . . . i really want your views on what we are doing , but thought you needed
some flavor and an sense of the urgency . if you can weigh in , do so
quickly . . . . .
barry pearce
06 / 30 / 00 04 : 47 am
to : john echols / enron communications @ enron communications , lou casari / enron
communications @ enron communications
cc :
subject : re : ebs var transaction policy
positive . . . .
- - - - - forwarded by barry pearce / enron communications on 06 / 30 / 00 04 : 49 am
- - - - -
ted murphy @ ect
06 / 29 / 00 11 : 33 am
to : barry pearce / enron communications @ enron communications @ enron
cc :
subject : re : ebs var transaction policy
barry ,
conceptually , i see no reason that a process like this can not be
implemented . in some way we have attempted to do so through the enron corp
transaction approval process ( tap ) . i have forwarded to john a copy of this ,
along with the risk management policy . i ' ll let him share with you if ok ( i
really don ' t want to act as the firm ' s in - house kinko ' s ! ! ) . we have taken
the first step and done poorly on follow - up steps to create a very easy to
follow process for anything other than direct funded capital . however , some
process around a greater number of assets / deals is better than none . i
agree that i have not seen a really good fully baked one implemented , but i
think it is wrong not to try .
the only concerns i have is that , given that we want to have " standard "
metrics and approval processes around the firm , ebs creates a process / metric
which is complementary to and integrates with processes / metrics that the
other business units are subjected to .
ted
barry pearce @ enron communications
06 / 29 / 2000 09 : 09 am
to : stinson gibner / hou / ect @ ect , dale surbey / lon / ect @ ect , ted
murphy / hou / ect @ ect
cc : lou casari / enron communications @ enron communications , john echols / enron
communications @ enron communications , jim fallon / enron communications @ enron
communications
subject : ebs var transaction policy
hey you guys ,
we are trying to implement a ' var transaction ' policy - and would like your
opinion .
this is going to be tough - because i ' m not sure we have implemented a
similiar policy across any of our other ' books ' - that is - we looking to
bring in all the accrual / operational assets as well as the mtm stuff
( lambdas ) . to have a real - live ' configuration ' of the system .
if assets / routes / servers etc . . . are added - what is the impact on the ' value '
of the system and what it ' s worth .
john has attached a draft below - for your review and thoughts .
i can see how this works in a trading environment - when you actually know
the var of your whole trading portfolio . however - i ' ve not seen this done
with a mixture of mtm & accrual assets . add the spice of a ' operational
system ' valuation - and this will be tough to quantify and model .
step 1 - configure system and value it
step 2 - calculate a var on this . we will need to do some work here !
step 3 - calculate the incremental var of new deals / amendements / reconfigs etc
- tough . . . .
see what you think ?
b .
john echols
06 / 28 / 00 05 : 41 pm
to : jim fallon / enron communications @ enron communications , barry pearce / enron
communications @ enron communications , lou casari / enron communications @ enron
communications
cc :
subject : policies
here is a first rough draft of a " value @ risk " transaction policy .
i would like you to start looking at where we are going on the policy and get
some early thinking going on limits for the v @ r . for example , should we
effectively shut down all server relocations without approval , or allow some
level of mb of storage to be moved around or reconfigured ?
i need some commercial and industry realism for this . we may need rick
paiste or your industry helpers ( marquardt , etc . to help us ) .
barry , lou , i need your input .