re : looking for " fat tails " in time - series for ngi - socal vince ,
i quite agree , we have to separate out price and position ,
and that is what we have done with the historical simulations / evt ideas . we
have taken today ' s delta - gamma , hold that frozen , and gone back historically
and looked at price changes and see what happens to portfolio changes .
garman and company have looked at gross historical portfolio changes , which i
agree is not the best approach , due to the artificiality imposed by largest
net open positions ( nop ) , such as we have seen recently .
regards
naveen
vince j kaminski @ ect
11 / 13 / 2000 10 : 31 am
to : tanya tamarchenko / hou / ect @ ect
cc : naveen andrews / corp / enron @ enron , vince j kaminski / hou / ect @ ect , vladimir
gorny / hou / ect @ ect
subject : re : looking for " fat tails " in time - series for ngi - socal
tanya , naveen ,
just a thought . changes in the portfolio values may combine both the changes
of prices and positions .
this happens if one tracks changes in the value of our historical gas
portfolio . a big jump in
the volumetric position from day to day , combined with a moderate price
movement may produce an
observation that looks artificially big .
if the volumetric position was frozen , it ' s just a scaling factor and there
should be
no discrepancy between your numbers . of course , the correct approach
is to separate the price process from the position changes .
vince
tanya tamarchenko
11 / 13 / 2000 08 : 38 am
to : naveen andrews / corp / enron @ enron
cc : vince j kaminski / hou / ect @ ect , vladimir gorny / hou / ect @ ect
subject : re : looking for " fat tails " in time - series for ngi - socal
naveen ,
i am trying to answer the question : what is the appropriate stochastic
process to model the behavior
of commodities ' prices in our var model . so what i do care about is the
behavior of log - returns .
any help is appreciated .
tanya .
naveen andrews @ enron
11 / 10 / 2000 04 : 35 pm
to : tanya tamarchenko / hou / ect @ ect
cc : vince j kaminski / hou / ect @ ect , vladimir gorny / hou / ect @ ect
subject : re : looking for " fat tails " in time - series for ngi - socal
tanya ,
we care about portfolio value changes , not log - returns of a
single contract , which has extremes in the behavior and can be fit to a
fat - tailed distribution . a 1 . 20 basis move , with 500 bcf position , is an
extreme event , anyway you slice it . in the literature , as elsewhere , i agree
for a single contract log - returns , they don ' t divide by vols .
regards
naveen
tanya tamarchenko @ ect
11 / 10 / 2000 04 : 17 pm
to : naveen andrews / corp / enron @ enron
cc : vince j kaminski / hou / ect @ ect , vladimir gorny / hou / ect @ ect
subject : re : looking for " fat tails " in time - series for ngi - socal
naveen ,
i got ngi - socal prices for prompt , prompt + 1 , . . . , prompt + 59 contracts .
for each contract i calculated moving average based on 21 log - returns as
well as moving volatility . then i calculated normalized log - returns :
[ return ( t ) - ave ( t ) ] / vol ( t )
and compared the results to normal distribution .
i could not find fat tails !
volatility changes a lot from day to day , so when people look at
log - returns ( not normalized ) it seems that there fat tails ( big spikes , large
returns more frequent than normal ) ,
which comes from the fact that volatility is not constant ( at all ) .
see the spreadsheet is under o : \ _ dropbox \ tanya
tanya
re : looking for " fat tails " in time - series for ngi - socal
vince ,
i quite agree , we have to separate out price and position ,
and that is what we have done with the historical simulations / evt ideas . we
have taken today ' s delta - gamma , hold that frozen , and gone back historically
and looked at price changes and see what happens to portfolio changes .
garman and company have looked at gross historical portfolio changes , which i
agree is not the best approach , due to the artificiality imposed by largest
net open positions ( nop ) , such as we have seen recently .
regards
naveen
vince j kaminski @ ect
11 / 13 / 2000 10 : 31 am
to : tanya tamarchenko / hou / ect @ ect
cc : naveen andrews / corp / enron @ enron , vince j kaminski / hou / ect @ ect , vladimir
gorny / hou / ect @ ect
subject : re : looking for " fat tails " in time - series for ngi - socal
tanya , naveen ,
just a thought . changes in the portfolio values may combine both the changes
of prices and positions .
this happens if one tracks changes in the value of our historical gas
portfolio . a big jump in
the volumetric position from day to day , combined with a moderate price
movement may produce an
observation that looks artificially big .
if the volumetric position was frozen , it ' s just a scaling factor and there
should be
no discrepancy between your numbers . of course , the correct approach
is to separate the price process from the position changes .
vince
tanya tamarchenko
11 / 13 / 2000 08 : 38 am
to : naveen andrews / corp / enron @ enron
cc : vince j kaminski / hou / ect @ ect , vladimir gorny / hou / ect @ ect
subject : re : looking for " fat tails " in time - series for ngi - socal
naveen ,
i am trying to answer the question : what is the appropriate stochastic
process to model the behavior
of commodities ' prices in our var model . so what i do care about is the
behavior of log - returns .
any help is appreciated .
tanya .
naveen andrews @ enron
11 / 10 / 2000 04 : 35 pm
to : tanya tamarchenko / hou / ect @ ect
cc : vince j kaminski / hou / ect @ ect , vladimir gorny / hou / ect @ ect
subject : re : looking for " fat tails " in time - series for ngi - socal
tanya ,
we care about portfolio value changes , not log - returns of a
single contract , which has extremes in the behavior and can be fit to a
fat - tailed distribution . a 1 . 20 basis move , with 500 bcf position , is an
extreme event , anyway you slice it . in the literature , as elsewhere , i agree
for a single contract log - returns , they don ' t divide by vols .
regards
naveen
tanya tamarchenko @ ect
11 / 10 / 2000 04 : 17 pm
to : naveen andrews / corp / enron @ enron
cc : vince j kaminski / hou / ect @ ect , vladimir gorny / hou / ect @ ect
subject : re : looking for " fat tails " in time - series for ngi - socal
naveen ,
i got ngi - socal prices for prompt , prompt + 1 , . . . , prompt + 59 contracts .
for each contract i calculated moving average based on 21 log - returns as
well as moving volatility . then i calculated normalized log - returns :
[ return ( t ) - ave ( t ) ] / vol ( t )
and compared the results to normal distribution .
i could not find fat tails !
volatility changes a lot from day to day , so when people look at
log - returns ( not normalized ) it seems that there fat tails ( big spikes , large
returns more frequent than normal ) ,
which comes from the fact that volatility is not constant ( at all ) .
see the spreadsheet is under o : \ _ dropbox \ tanya
tanya