(Un)Calculated Risk | by Peter Orr of Intuitive Analytics

MSRB: On MA exam, what is “Forfeited Option Value” in a Refunding?

Posted by Peter Orr on Jun 06, 2015

“Any measurement you make, without knowledge of its uncertainty, is completely meaningless.”

- Prof. Walter Lewin, MIT Physics 101
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3 Things that Drive “Advance Refunding Option” Value

Posted by Peter Orr on May 12, 2015

Essentially, all models are wrong, but some are useful.

- George Box
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Press (and Fed): Market-based expectations wrong for issuers and investors

Posted by Peter Orr on Apr 25, 2015

We’ve written a number of articles talking about financial forecasting being a necessary evil, implied forward yields being miserable predictors of realized yields, and recently the inappropriate use of option pricing models (requiring market-based inputs) when doing refunding analysis. We even wrote a paper on it as we see a lot of misunderstanding by pubfin practitioners on this point.

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New Headline: Muni Issuers Make Outstanding Speculators

Posted by Peter Orr on Apr 18, 2015

The path is smooth that leadeth on to danger.

– William Shakespeare
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Why this is the Best Refunding Policy Ever

Posted by Peter Orr on Apr 10, 2015

"I don't think necessity is the mother of invention. Invention, in my opinion, arises directly from idleness, possibly also from laziness - to save oneself trouble."

- Agatha Christie
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Why Corporates don’t get Munis – It’s Refundings, Stupid

Posted by Peter Orr on Mar 14, 2015

Yesterday I spoke at a luncheon (many thanks to MAGNY for a great event) where, during Q&A, a number of people commented on how difficult it is for those who grew up doing corporate bonds to try to cross over into muni-land’s veritable Oz. With all the talking trees and flying monkeys, munis can be pretty disorienting. And I’ve seen it happen many times myself; graveyards are indeed littered with the corpses of corporate types who come to munis and just never get it, both on the buy-side and the banker/sell-side. They show up bright-eyed and bushy-tailed talking about “benchmark this” and “OAS that” but ultimately wind up crouched in a corner mumbling something about 5 and 10 year bullets.

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New Tech for Investors: Refunding Adjusted Yield (RAY)

Posted by Peter Orr on Mar 06, 2015

“I have two ways of learning from history: from the past, by reading the elders; and from the future, thanks to my Monte Carlo toy.”

- Nassim Taleb, Fooled by Randomness
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Trinity Uses RAY to assess 4s vs 5s - 2nd Gen Refunding Matters!

Posted by Peter Orr on Feb 25, 2015

"Prediction is very difficult, especially if it's about the future."  - Niels Bohr

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Why Option Pricing Models are Wrong for Tax-exempt Issuers (Part 2)

Posted by Peter Orr on Feb 06, 2015

In Part 1 (a suggested read if you’re getting to this article first) we proposed 3 questions that determine whether bond option pricing models, in contrast to real-world option models, are appropriate for tax-exempt issuers analyzing their callable bonds:

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Why Option Pricing Models are Wrong for Tax-exempt Issuers (Part 1)

Posted by Peter Orr on Feb 03, 2015

"It's not how we make mistakes, but how we correct them, that defines us."  - Anonymous

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