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

Refunding Adjusted Yield (RAY) Shines Light on Issuer Financing Cost

Posted by Peter Orr on Jan 23, 2015

It’s 2015. Watson vanquished humans in Jeopardy 4 years ago and is now rapidly moving towards replacing as many oncologists as possible. Google is just one company running driverless cars and trucks around everywhere. Facebook is trying to monetize every eye twitch you make looking at a web page. Let’s check in on innovation in public finance:

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New Research: Advance Refunding Always Destroys Value - Use a Swap

Posted by Peter Orr on Aug 08, 2013

“Real knowledge is to know the extent of one’s ignorance” - Confucius

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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 - 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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The ‘Formula that Killed Wall Street?’ or ‘Know A Bad Rate Model When You See It’

Posted by Peter Orr on Jun 19, 2012

"Copulas are generally an early doodling activity in an area." - Anonymous Street quant

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VIDEO: Cashflow Risk Statistics for Tax-exempt Debt Management

Posted by Peter Orr on May 01, 2012

"Anyone who stops learning is old, whether at twenty or eighty. Anyone who keeps learning stays young. The greatest thing in life is to keep your mind young."  - Henry Ford 

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Refunding PV Savings - Arbitrage Yield or Zero Rates?

Posted by David De la Nuez on Mar 29, 2012

"If we don't change direction soon, we'll end up where we're going" - Professor Irwin Corey

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Changing Times: Our 2012 New Year's Resolution to Public Finance

Posted by Peter Orr on Jan 06, 2012

“I think the whole idea is to look for good ideas, be innovative. I was interested in things even if I didn’t have much to do with them. When I had a job to do, an assignment, I did things with it. I built a fire under it.”     - Joseph Siegel, aka Mr. CUSIP

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How Many Refunding Opportunities are You Missing?

Posted by Peter Orr on Aug 19, 2010

With rates this low, how much time and money are you spending running and re-running refunding numbers for your issuer clients and targets? This is an expensive, labor intensive, manual task that is far more accurately, predictably, and cost-effectively done across the department through use of a robust database solution that emails results to the banker, advisor, or issuer.

If you have no idea how much time and money is spent performing these tasks, they likely are costing you way too much. After all, what gets measured gets managed… 
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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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