"It's not how we make mistakes, but how we correct them, that defines us." - Anonymous
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.
"The dividend of the computer revolution to us did not come in the flooding of self-perpetuating email messages and access to chat rooms; it was in the sudden availability of fast processors capable of generating a million sample paths per minute."