We have created four additional graphs to be published daily along with the 
DPR: 

Return on VaR (ROVAR)
Curve Shift P&L (Delta - Gamma) Sharpe Ratio
Risk - Return (Large)
Risk - Return (Small)

All of these graphs deal with the concept of risk-adjusted return.  The 
markets in which we operate have unlike risk characteristics.  Furthermore, 
Enron's appetite for risk also differs in each market.  As a result, it is 
difficult to compare returns in absolute terms.  Therefore, the approach of 
these graphs is to divide return by a measure of risk, in effect restating 
return numbers into a standard base (how many dollars we earn for every 
dollar we put at risk).


 For each business unit or commodity group, the ROVAR graph shows an average 
of daily total P&L divided by an average of daily VaR.  Higher ROVARs 
indicate better performance (relative to other business units).  For each 
business unit or commodity group there are two bars: the dark blue on the 
left shows ROVAR on a 4 week (20 business day) rolling basis, and the light 
blue on the right shows ROVAR on a 1 week (5 business day) rolling basis.  
Because of the shorter term, the 1 week ROVAR is more sensitive: it can be 
quite high or low, and it changes frequently.


The Sharpe Ratio graph is very similar in concept; it shows an average of 
daily curve shift P&L (both delta and gamma) divided by its standard 
deviation. This Sharpe ratio is uncomplicated by non-trading P&L (like new 
deals, reserves, and so forth).  Furthermore, whereas VaR is a forward 
looking statistic (the most we are likely to lose in one day with a given 
probability), standard deviation is backward looking (the actual volatility 
of our returns over the period). This graph also has two bars for every 
business unit or commodity group: a dark brown on the left showing the Sharpe 
ratio on a 4 week rolling basis, and a light brown on the right showing the 
ratio on a 1 week basis.

The Curve Shift P&L Sharpe Ratio and the ROVAR graphs complement each other 
well.  They measure different things, but if our P&L is composed mostly of 
curve shift, and if our VaR closely predicts curve shift volatility, the two 
statistics should be very close.


Sometimes it is interesting to see the actual magnitude of the P&L relative 
to the risk.  We therefore put together the Risk - Return graphs.  On the 
vertical axis, they show 4 week rolling average P&L.  On the horizontal, they 
show 4 week rolling average VaR.  The various business units are plotted as 
points on the graphs.  These graphs are closely related to the 4-week ROVARs, 
in that the vertical value of every point divided by its horizontal value is 
the business unit's ROVAR (average P&L / average VaR).  Another way of 
looking at these graphs is that the slope of a line connecting the origin 
(0,0) with the plotted point of a business unit is its ROVAR.  Books with 
small risks and returns (< $2 million) are plotted on the "Small" graph, and 
the rest, on the "Large".

These graphs are based on the DPR Database that we built to standardize and 
capture the information that is reported in the DPR.  Most, but not all of 
the information in the DPR currently flows from the database.  As a result, 
we do not have ROVARs or Sharpe Ratios for every business unit.  As we 
continue to set up exports into the database, we will fill in the missing 
numbers.

We will e-mail you these graphs every day until we can publish them on the 
intra-net.  Please remember to launch the file in Excel, instead of using the 
Lotus Notes viewer.  The VaR Limit Usage graphs that we created last week are 
already on the web.  We hope that you find all of these useful.



Regards,



Eugenio Perez
Enron Emails
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