Read More“Any measurement you make, without knowledge of its uncertainty, is completely meaningless.”
- Prof. Walter Lewin, MIT Physics 101
Read More“Any measurement you make, without knowledge of its uncertainty, is completely meaningless.”
- Prof. Walter Lewin, MIT Physics 101
We see a lot of confusion in public finance as to how to analyze refundings. Unfortunately I think much of it stems from people outside of public finance coming in without a complete understanding of the environment in which a tax-exempt issuer operates i.e. the muni market. These interlopers get excited when they see option specifications in an official statement, then cry out, “We’ve seen these before. We have fantastic models used everywhere else, they must apply here too!” Unfortunately the foundational assumptions underpinning these models do not exist in the muni market leading this statement to be bunk (technical term my father used to use…). In fact those elegant bond options models do not apply in the muni flea market.
Today on (Un)Calculated Risk we welcome Shaun Rai, a Managing Director at Montague DeRose and Associates, as our guest contributor (and another outstanding IA client!).
"Despite its role in...finance, the expectations hypothesis (EH) of the term structure of interest rates has received virtually no empirical support." - Predictions of Short-Term Rates and the Expectations Hypothesis, Federal Reserve Bank of St. Louis
"Horse sense is the thing a horse has which keeps it from betting on people" - W.C. Fields
We are honored this week to have a guest post from Win Smith, author of the The Well-Tempered Spreadsheet. Win is the president of Win Analytics LLC, an independent research and advisory firm.
I finally know what distinguishes man from the other beasts: financial worries.
- Jules Renard
Here’s a quick quiz. If over the last 10 years 1M LIBOR reset weekly averaged 2.814%, and the average of SIFMA / 1M LIBOR was 82.0%, what was the SIFMA average over the same time period (all rates unadjusted for day counts, holidays etc.)?
Topics: Financial Decisions, SIFMA, public finance analytics, libor
