re : alex ' s paper comments : 1 . in the sentence between eqn . 3 and eqn . 4 , i think " annualized volatility " should replace " annualized standard deviation . " 2 . as to the comment , " immediately we see something quite counter - intuitive . " i would disagree . i think that its quite intuitive that this model should get closer to the black - scholes price as what is defined as the " jump " component becomes just part of the main price distribution , which happens if we define a jump to be only a 1 - sigma event . the table does show , however , that the results of using this model are very sensitive to exactly how you choose to define a " jump " ( i . e . 2 - sigma or 3 - sigma . . . events ) , and this is one difficulty in using the model in practice . 3 . in the paragraph after the table , i don ' t understand the argument about hedging the option . especially about buying a swap which would pay on the difference between the strike and fs . this seems non - sensical . 4 . i could not follow the logic of the last two sentences of the article , so this point should probably be explained more clearly . - - stinson vince j kaminski 08 / 18 / 2000 08 : 15 am to : grant masson / hou / ect @ ect , stinson gibner / hou / ect @ ect , alex huang / corp / enron @ enron cc : subject : alex ' s paper minor changes i made to alex ' s paper . vince