proj . x analytics diligence 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outdated .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
proj . x analytics diligence
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