(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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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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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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The Right Analysis for Refundings – MSRB, Take Note

Posted by Peter Orr on Jan 29, 2015

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.

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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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Refundings Show Finance Profs How to Colossally Screw-Up Finance

Posted by Peter Orr on Oct 09, 2013

"To confuse the model with the world is to embrace a future disaster driven by the belief that humans obey mathematical rules."  - The Financial Modeler's Manifesto, Emanual Derman and Paul Wilmott

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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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The RIGHT refunding discount rates to use? Wrong question...

Posted by Peter Orr on Aug 14, 2012

 I finally know what distinguishes man from the other beasts: financial worries.
- Jules Renard

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