Bernard,

My coordinates:

Vincent Kaminski
Managing Director - Research
Enron Corp.
1400 Smith Street
Room EB1962
Houston, TX 77002-7361

Phone: (713) 853 3848
 (713) 410 5396 (cell)
Fax  :  (713) 646 2503
E-mail: vkamins@enron.com

Yes, we are going into a very interesting summer both here and in the UK. 


Vince






"Murphy, Bernard" <Bernard.Murphy@caminus.com> on 03/27/2001 01:23:04 AM
To: "'Vince.J.Kaminski@enron.com'" <Vince.J.Kaminski@enron.com>
cc:  
Subject: RE: Thesis on Electricity Price Jump-Diffusions


Hi Vince,

Can you e-mail me your mailing address in Houston and I will send you a hard
copy of the above today.  Apologies for delay, but I wanted to ensure that
Les Clewlow had received his copy in Sydney before distributing any other
copies.

Incidentally, today (March 27th) is a red letter day in the UK as the NETA /
new electricity trading arrangements have gone 'live'.  Should be
interesting to observe the development of the paper market in the coming
months - you're no doubt aware that IPE have just launched an electricity
futures contract.

Regards

Bernard





-----Original Message-----
From: Vince.J.Kaminski@enron.com [mailto:Vince.J.Kaminski@enron.com]
Sent: 01 March 2001 15:37
To: Murphy, Bernard
Cc: vkaminski@aol.com; Vince.J.Kaminski@enron.com
Subject: RE: 1997 Risk paper on Pricing of Electricity Derivatives



Bernard,

Yes, I can  read a DVI file. You can also  cc
my home address: Vkaminski@aol.com. I shall
try to send you an answer to your question on weekend.

Vince





"Murphy, Bernard" <Bernard.Murphy@caminus.com> on 03/01/2001 09:18:58 AM

To:   "'Vince.J.Kaminski@enron.com'" <Vince.J.Kaminski@enron.com>
cc:
Subject:  RE: 1997 Risk paper on Pricing of Electricity Derivatives


Vince,

I can send you a Scientific Word DVI file (at the weekend) if you can read
SCientific Word files ?  The dissertation hasn't been reviewed by Les or
the
External yet - although its been at FORC for 2 months. I think that the
Empirical Chapter is probably the one which would be of most relevance to
both our company's businesses - although I ultimately didn't have the time
to 'explicitly' price the jump risk-premium which I conjectured is possibly
implicit in the prices of exchange-traded electricity futures-options -
rather I developed an implicit estimation procedure which will enable a
rough assessment (with a little bit of further work, but not too much) be
made of the price of jump risk in wholesale power markets.

In other words, I assumed spot jump-risk to be undiversifiable, and
essentially devoted 2 Theoretical Chapters to :

1) proving that a jump-diffusion trading model is "incomplete"
(synthesising
the securities markets framework with martingale representation theory) -
note that I did not assume that markets could be dynamically completed with
'term structure' securities as in the HJM w/ jumps papers of Shirakawa and
Das and;

2) deriving an explicit risk-adjustment process for 'implementing' the
price
of jump-risk using a jump-diffusion marginal indirect utility of wealth
process (ie. a jump-augmented production economy approach in the spirit of
CIR, Bates, Ahn & Thompson).


Incidentally, I would be keen to find out if you or any of your team done
much work on real-asset valuations in a spark-spread option-valuation
framework ?  I'm about to start a project evaluation of embedded
optionality, and have a dilemna whether I should model the spot or forward
gas / power price processes.  With the former, I can model mean-reversion
and jumps explicitly (obviously, important for capturing the optionality of
out-of-the-money plant, which might otherwise be ignored in a
pure-diffusion
framework) but am not maximising the informational content of the available
market data (that is, assuming there was a long-term market forward curve
for electricity); whereas in the latter the driftless forward supposition
means that I have to capture mean-reversion via the futures volatility
function, and jumps are less easy to calibrate.  Any suggestions ?

Regards


Bernard





-----Original Message-----
From: Vince.J.Kaminski@enron.com [mailto:Vince.J.Kaminski@enron.com]
Sent: 01 March 2001 14:54
To: Murphy, Bernard
Cc: Shirley.Crenshaw@enron.com; Vince.J.Kaminski@enron.com
Subject: Re: 1997 Risk paper on Pricing of Electricity Derivatives



Bernard,

I am forwarding your message to my assistant and she will mail you a
reprint.
I would be glad to take a look at your dissertation. Is it available as a
publication, working paper?

Vince





"Murphy, Bernard" <Bernard.Murphy@caminus.com> on 03/01/2001 02:17:39 AM

To:   "'Vince.J.Kaminski@enron.com'" <Vince.J.Kaminski@enron.com>
cc:
Subject:  1997 Risk paper on Pricing of Electricity Derivatives


Hello Vince,

My name is Bernard Murphy - I received your e-mail address from Les
Clewlow,
who was my PhD supervisor at the Financia Options Research Centre at
Warwick
Business School.  I've just finished my PhD on Electricity Price Jump
Diffusions :  A Theoretical and Empirical Study in Incomplete Markets -
hence my interest in electricity price modelling and derivative pricing.  I
was looking to get hold of a copy of your 1997 paper, which has recently
come to my attention :

"The Challenge of Pricing & Risk-Managing Electricity Derivatives", The US
POwer Market, Risk Publications, pp. 149-171.

and Les suggested that I contact you directly (Les is travelling at present
and doesn't have an electronic copy available) to request an e-copy.

Incidentally, I am Lecturer in Finance / Financial Mathematics at
University
of Limerick (Ireland) and have taken a year out to work for Caminus UK,
where I am working on introducing and developing a markets-based approach
(spark-spread) to real asset valuations in the UK power industry.

Thanks in advancve

Bernard Murphy