--- title: (Un)Calculated Risk | by Peter Orr of Intuitive Analytics | SIFMA | Intuitive Analytics description: SIFMA | by Peter Orr of Intuitive Analytics --- # (Un)Calculated Risk | by Peter Orr of Intuitive Analytics ## [VIDEO: SIFMA and LIBOR Interest Rate Model for Public Finance](https://www.intuitive-analytics.com/blog/bid/52951/VIDEO-SIFMA-and-LIBOR-Interest-Rate-Model-for-Public-Finance) Posted by Peter Orr on Apr 21, 2012 Lots of people think rate models are the sole domain of astrophysicists who've gone through a career change. In this video, we break down the details of a simple but very powerful interest rate model that captures the fact that variable rates....well, vary. It's a companion to our [Cashflow Model Example.xls](https://www.intuitive-analytics.com/resources/free-models/cashflow-model-example/) and whitepaper on [Interest Rate Models for Liability Management](https://www.intuitive-analytics.com/white-papers/the-time-has-come-interest-rate-modeling-for-liability-cash-flow-analysis/).  Enjoy and let us know what you think! [Read More](https://www.intuitive-analytics.com/blog/bid/52951/VIDEO-SIFMA-and-LIBOR-Interest-Rate-Model-for-Public-Finance) Topics: [interest rate model](https://www.intuitive-analytics.com/blog/topic/interest-rate-model), [financial model](https://www.intuitive-analytics.com/blog/topic/financial-model), [SIFMA](https://www.intuitive-analytics.com/blog/topic/sifma) ## [Basel III and the Future of Bank Supported VRDBs in Public Finance](https://www.intuitive-analytics.com/blog/bid/32507/Basel-III-and-the-Future-of-Bank-Supported-VRDBs-in-Public-Finance) Posted by Peter Orr on Nov 01, 2010 [![](https://www.intuitive-analytics.com/hs-fs/file-15744000-jpg/images/istock_guy_head_on_desk_small.jpg) ](https://www.intuitive-analytics.com/blog/bid/32507/Basel-III-and-the-Future-of-Bank-Supported-VRDBs-in-Public-Finance) Last Friday I attended the Municipal Analysts Group of New York ([MAGNY](http://www.magny.org/))'s lunch event on [Basel III](http://www.basel-iii-accord.com/) and the future of the muni variable rate market. First MAGNY event I've been to; it was solid. Chris Wolfe, a Fitch bank analyst, Barbara Samett an analyst from Vanguard, and Bill Collins an MD in public finance at the Bank of Nova Scotia were panelists.  [Basel I](http://en.wikipedia.org/wiki/Basel_I) was originally designed to set minimum capital levels for banks and create a level playing field for lenders from different countries. Basel I was rather simple and treated a wide range of credit risks with a coarse set of requirements, leading to regulatory arbitrage. It created perverse incentives for banks to load up on more risk increasing expected returns on capital. [Basel II](http://en.wikipedia.org/wiki/Basel_II) provided more granularity to asset classes and went down a more quantitative path allowing banks to use an internal ratings based approach. Unfortunately, Basel II also led to absurd things like 99.9% one year confidence levels. If you think you can reliably capture events that happen once in a thousand years, I've got some watery real estate in the Southeast for you...  In light of the recent financial crisis and the fact that the once in a thousand year events seem to be occurring every 8-10 years, [Basel III](http://en.wikipedia.org/wiki/Basel_III) (The Return of the Regulators) is upon us. What does this mean for banks and their letter and line of credit products?  Here were the highlights from the discussion: - Basel III has "scenario based" tests that will generally lead to significantly higher capital charges for banks, decreasing expected [RAROC](http://en.wikipedia.org/wiki/Risk_adjusted_return_on_capital). - Basel III includes the concept of a "Net Stable Funding Ratio" for which Chris said none of the banks were particularly well-positioned. This may not go fully into effect until 2018.    [Read More](https://www.intuitive-analytics.com/blog/bid/32507/Basel-III-and-the-Future-of-Bank-Supported-VRDBs-in-Public-Finance) Topics: [SIFMA](https://www.intuitive-analytics.com/blog/topic/sifma), [public finance](https://www.intuitive-analytics.com/blog/topic/public-finance), [variable rate bonds](https://www.intuitive-analytics.com/blog/topic/variable-rate-bonds) ## [The Flaw of Averages, Muni Style: SIFMA/LIBOR and Rates](https://www.intuitive-analytics.com/blog/bid/27321/The-Flaw-of-Averages-Muni-Style-SIFMA-LIBOR-and-Rates) Posted by Peter Orr on Jul 28, 2010 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](http://www.sifma.net/swapdata.html) average over the same time period (all rates unadjusted for day counts, holidays etc.)? [Read More](https://www.intuitive-analytics.com/blog/bid/27321/The-Flaw-of-Averages-Muni-Style-SIFMA-LIBOR-and-Rates) Topics: [Financial Decisions](https://www.intuitive-analytics.com/blog/topic/financial-decisions), [SIFMA](https://www.intuitive-analytics.com/blog/topic/sifma), [public finance analytics](https://www.intuitive-analytics.com/blog/topic/public-finance-analytics), [libor](https://www.intuitive-analytics.com/blog/topic/libor) ## [NYT and the 0.14% that Swallowed Your Town, pt 2](https://www.intuitive-analytics.com/blog/bid/23481/NYT-and-the-0-14-that-Swallowed-Your-Town-pt-2) Posted by Peter Orr on May 18, 2010 Last week I [embarked down a path](https://www.intuitive-analytics.com/blog/bid/18228/NYT-and-Press-Get-Your-Facts-Straight-About-Municipal-Swaps) of trying to get the NYT to correct their errors in an article ostensibly on municipal swaps. This is the second round exchange (of three) with the NYT editors justifying their mistakes in the article, [The Swaps That Swallowed Your Town](http://www.nytimes.com/2010/03/07/business/07gret.html).  My response was simple, though I was forced to use a three number example. [Read More](https://www.intuitive-analytics.com/blog/bid/23481/NYT-and-the-0-14-that-Swallowed-Your-Town-pt-2) Topics: [SIFMA](https://www.intuitive-analytics.com/blog/topic/sifma), [public finance](https://www.intuitive-analytics.com/blog/topic/public-finance), [swaps](https://www.intuitive-analytics.com/blog/topic/swaps), [tax-exempt financing](https://www.intuitive-analytics.com/blog/topic/tax-exempt-financing), [municipal swaps](https://www.intuitive-analytics.com/blog/topic/municipal-swaps) ## [NYT and Press: Get Your Facts Straight About Municipal Swaps](https://www.intuitive-analytics.com/blog/bid/18228/NYT-and-Press-Get-Your-Facts-Straight-About-Municipal-Swaps) Posted by Peter Orr on Mar 10, 2010 "Knit Cap Creates Huge Hangover" is Not a Good Headline   [Read More](https://www.intuitive-analytics.com/blog/bid/18228/NYT-and-Press-Get-Your-Facts-Straight-About-Municipal-Swaps) Topics: [Wall Street](https://www.intuitive-analytics.com/blog/topic/wall-street), [SIFMA](https://www.intuitive-analytics.com/blog/topic/sifma), [public finance](https://www.intuitive-analytics.com/blog/topic/public-finance), [swaps](https://www.intuitive-analytics.com/blog/topic/swaps), [municipal swaps](https://www.intuitive-analytics.com/blog/topic/municipal-swaps), [press](https://www.intuitive-analytics.com/blog/topic/press) ## [Are munis over-hedged with swaps? Pt3](https://www.intuitive-analytics.com/blog/bid/13642/Are-munis-over-hedged-with-swaps-Pt3) Posted by Peter Orr on Oct 25, 2009 [![](https://www.intuitive-analytics.com/hs-fs/file-15737649-png/images/annual_cashflow_benefit_from_58_percent_libor_plus_52bps_vs_68_percent_libor_swap.png) ](https://www.intuitive-analytics.com/blog/bid/13642/Are-munis-over-hedged-with-swaps-Pt3) "It is better to understand a little, than to misunderstand a lot." [Read More](https://www.intuitive-analytics.com/blog/bid/13642/Are-munis-over-hedged-with-swaps-Pt3) Topics: [SIFMA](https://www.intuitive-analytics.com/blog/topic/sifma), [swaps](https://www.intuitive-analytics.com/blog/topic/swaps), [libor](https://www.intuitive-analytics.com/blog/topic/libor), [muni](https://www.intuitive-analytics.com/blog/topic/muni), [hedging](https://www.intuitive-analytics.com/blog/topic/hedging) ## [Are munis over-hedged with swaps? pt2](https://www.intuitive-analytics.com/blog/bid/13639/Are-munis-over-hedged-with-swaps-pt2) Posted by Peter Orr on Aug 09, 2009 [![](https://www.intuitive-analytics.com/hs-fs/file-15744319-png/images/libor_sifma_graph.png) ](https://www.intuitive-analytics.com/blog/bid/13639/Are-munis-over-hedged-with-swaps-pt2) "Our lives improve only when we take chances - and the first and most difficult risk we can take is to be honest with ourselves." [Read More](https://www.intuitive-analytics.com/blog/bid/13639/Are-munis-over-hedged-with-swaps-pt2) Topics: [Spreadsheets](https://www.intuitive-analytics.com/blog/topic/spreadsheets), [SIFMA](https://www.intuitive-analytics.com/blog/topic/sifma), [Tax and Accounting Issues](https://www.intuitive-analytics.com/blog/topic/tax-and-accounting-issues), [libor](https://www.intuitive-analytics.com/blog/topic/libor) ## [Are munis over-hedged with swaps? pt1](https://www.intuitive-analytics.com/blog/bid/13633/Are-munis-over-hedged-with-swaps-pt1) Posted by Peter Orr on Jun 25, 2009 [![](https://www.intuitive-analytics.com/hs-fs/file-15737705-png/images/are_munis_over-hedged_with_swaps.png) ](https://www.intuitive-analytics.com/blog/bid/13633/Are-munis-over-hedged-with-swaps-pt1) "Opportunity is missed by most people because it is dressed in overalls and looks like work." 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