risk metrics completely agree nevertheless sorry make clear talked last tuesday advocating penalizing business units lweek rovars sharpes would certainly set traders bonuses based numbers think anyone enron would consider enron focuses long term profit risk however long term made many short terms catastrophes occur company management pay close attention latter indeed enron management interested short term profitability want notified large 1 5 day losses short term risk report daily var limit violations spirit simply offering 1 4 week rovars sharpes something interesting useful produce dpr database let upper management use ignore see fit regards eugenio naveen andrews enron 09 08 2000 11 13 eugenio perez hou ect ect cc ted murphy hou ect ect subject risk metrics eugenio regard recent e mail concerning rovar sharpe risk metrics meeting tuesday imperative understand 1 p l number one aggregate daily basis var numbers 1 week 4 week basis consequently rovar numbers meaningful operationally ie trading activity senior management decision making statistically rovar sharpe designed measure business unit performance extended time periods preferably year specifically penalize make reasonable business decisions unit 1 week rovar sharpe 2 significant trading activity ene composed long term strategic trades seasonal plays durations 6 months perhaps wherein desk heads senior management intuitive feeling rovar 6 months 1 week 4 week interim number case useful traders might purposefully want make certain 1 week 4 week rovar low trading activity believe 6 month number high case 1 week number might send dangerous messages senior management 3 conceptually p l var isolation numbers sound rigourously calculated ratio however one careful numerator cumulative p l certain period aggregated simple arithmetic summation problems however denominator average daily var certain period relies underlying assumption point time series independent correlationless get sufficient statistic denominator one would take large sample series 6 months daily average var number meaningful statistically 4 rac group instituted similar metrics usage two years numbers shown b express intent comaring business unit performance 6 month yearly tenor please contact matthew adams rac make sure footing regarding actual calculation metrics also future consistent page please contact mr adams risk related numbers showcased public forum 5 finally probably corroborate senior management might fully versed nuances var let alone 1 week var ratios therefore one wary misuse ratios risk metrics liked presentation database tuesday think nice step aggregating dissecting p l disparate sources best regards naveen