re : implementing term - structure of correlations for power tanya ,
while there is seasonal correlations in power , especially for np - 15
and sp - 15 ( same region ) , the term structure of correlations can be input .
however , the same correlation structure with similar periodicity may not hold
between np - 15 and , say , rlb ( neepool ) , though one would imagine that
relationship would still be seasonal ( summer / winter ) , with greater noise .
even if the correlational term structure is to be done for power , different
rules would have to be inputted for different regions .
naveen
tanya tamarchenko @ ect
10 / 05 / 2000 10 : 42 am
to : vladimir gorny / hou / ect @ ect , naveen andrews / corp / enron @ enron
cc : kirstee hewitt / lon / ect @ ect , debbie r brackett / hou / ect @ ect , wenyao
jia / hou / ect @ ect , vince j kaminski / hou / ect @ ect
subject : re : implementing term - structure of correlations for power
vlady
2 ) correlations are periodic with a period of 1 year ( this means we can use
12 correlation matrices calculated from
first 12 forward contracts and apply these matrices to other forward months ) ;
3 ) using decay factor makes the curves a little smoother .
implementation of multiple correlation matrices will not affect the speed of
calculations in var model significantly .
please , give me your response ,
thanks ,
tanya .