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Subject: new volatility curve generator for uk power we have established a set of power volatility curves down to the efa / monthly level of detail that can be marked to market up to 6 years out . beyond this , the volatility decays to what we understand to be the long - term level for power volatility , given our understanding of the behaviour of forward prices over large time - scales . the swaption traders can now fit the first 5 - 6 years of the volatility curve to the market - observed baseload swaption implied volatilities ( typically 3 to 12 months duration for the underlying swap ) and then be in a good position to price other swaptions ( including swaptions on individual efa slots ) consistent with the curve . there may also be an impact on the daily var calculation . an illustration of the current volatility curves is pasted below : - these curves will be reset as the market moves , and allow a mark - to - market approach to be followed for our volatility book . the spreadsheet model is saved in t : \ readwrte \ elec _ uk \ models \ . xls and also attached below for houston staff to review . [ stinson - i ' d be grateful if you could offer an opinion / audit to ensure that i haven ' t missed anything , thanks . ] regards , anjam x 35383 |