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

Munis Plus Bad Modelling Yields Option-Adjusted Nonsense

Posted by Peter Orr on Dec 11, 2015

“Everything should be made as simple as possible, but not simpler.”   - Albert E

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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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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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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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Why Option Pricing Models are Wrong for Tax-exempt Issuers (Part 1)

Posted by Peter Orr on Feb 03, 2015

"It's not how we make mistakes, but how we correct them, that defines us."  - Anonymous

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Hull-White add Weight to New Interest Rate Modeling Research

Posted by Peter Orr on Apr 04, 2014

Last summer I wrote an article describing a missing link in rate modeling that had been discovered in exciting new research by Nick Deguillaume, Ricardo Rebonato, and Andry Pogudin entitled The nature of the dependence of the magnitude of rate moves on rates levels: a universal relationship. This mouthful offered two simple takeaways. First, accurately capturing how rates are expected to change, particularly over long time horizons, is central to every rate risk management decision we face. And second, that so-called “standard models” that don’t provide for the observed fact that rates tend to change differently depending on their level aren’t so realistic nor as a result, very good at informing interest rate decisions like refunding opportunities.

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2013 Discovery - The Missing Link in Interest Rate Modeling!

Posted by Peter Orr on Jun 20, 2013

"There is no logical way to the discovery of these elemental laws. There is only the way of intuition, which is helped by a feeling for the order lying behind the appearance."  - Albert Einstein

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