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

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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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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HELP! Can SOMEONE Calculate Refunding PV Savings?

Posted by Peter Orr on May 02, 2013

"If people do not believe that mathematics is simple, it is only because they do not realize how complicated life is."                               - John von Neumann

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VIDEO: Muni Bond Sizing through Linear Optimization

Posted by Peter Orr on Apr 24, 2013

My colleague David de la Nuez (PhD Operations Research) and I build on the linear algebra from our prior video to show how to set up sources and uses and cash flows for a hypothetical three bond deal. Dr. David then solves the linear program using a few simple lines of MATLAB code; doesn't get much juicier than this, don't miss it!   

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VIDEO - Optimization in Muni Bond Sizing

Posted by Peter Orr on Mar 15, 2013

"Computer programming is an art, because it applies accumulated knowledge to the world, because it requires skill and ingenuity, and especially because it produces objects of beauty. A programmer who subconsciously views himself as an artist will enjoy what he does and will do it better."  Donald Knuth

This video builds on the overwhelming popularity of our first video on using linear algebra to structure bond deals in public finance and lays out a technique for applying a basic optimzation algorithm to simultaneously size and amortize a $100 million municipal bond deal, from 10 years out to 3,000 (just for fun). 

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VIDEO: Using Excel to Size a Muni Bond Deal

Posted by Peter Orr on Aug 30, 2012


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Financial Software: The answer to “Build or Buy?”

Posted by Peter Orr on Jun 07, 2010

"Programming today is a race between software engineers stirring to build bigger and better idiot-proof programs, and the universe trying to produce bigger and better idiots. So far, the universe is winning."            - Unknown

Many public finance businesses are grappling with the "build vs buy" question as it relates to their analytic tools.  I've commented here on the challenges of building good financial software and frankly, most firms that aren't specifically in software development are poorly equipped to do so.  And this is a tangentially related and important question.

Of course, build vs buy is not a new question generally but it may be new to some in financial services. The most succinct variant of the common wisdom on this is in this infoworld article . Here's the bottom line from the article:

"Decades of trial, error, and egghead analysis have yielded a consensus conclusion: Buy when you need to automate commodity business processes; build when you're dealing with the core processes that differentiate your company."

There's an interesting dynamic about the technology "backbone" behind a public finance business (providing accurate/current debt profiling, refund screens, historic prices and reset histories from EMMA, bond and option valuation functionality, etc).  Although these may be commodity business processes that every banking/advisory/investment firm must do in one form or another, that data backbone serves as the foundation for proprietary analytic tools and reports that can differentiate one from the rest. 

At IA, we do both automation and innovation so that the workflow public finance analytics need to support are fully addressed. This allows us to be far more efficient and effective in designing each.    

Other good "build vs buy" articles here:


MIT Free Software: Build or Buy Dilemma 

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Top 5 Things Your Public Finance Software Must (now) Do

Posted by Peter Orr on Apr 01, 2010

It's 2010 and time to raise the bar.  Public finance software has remained substantially unchanged for over a decade, and probably more like two.   In this day and age your public finance software, in addition to all the other stuff it's done since TRA86, must add the following five features: 

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The Big BAD Mistake about BABs

Posted by Peter Orr on Feb 19, 2010

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

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