Description
It is an oft-repeated mantra that "munis are different" and that standard analytical tools are irrelevant to managing them. Andrew Kalotay certainly agrees that munis are different. In fact, they are more complex than just about any other bond category. Munis are rich in options, their pricing is tax-dependent, the benchmark curves are comprised of callable bond yields ... and the list goes on.
Dr. Kalotay argues that the complexities of munis actually mandate the use of modern fixed income analytics. He demonstrates the necessity for option-adjusted spread (OAS) technology, and exposes the potential pitfalls of risk management by "yield-to-worst." And he offers an in-depth discussion of the de minimis tax effect, which depresses the prices of discount munis. The breakthrough concept of tax-neutral OAS analysis accurately captures this effect. Without tax-neutral OAS, discount munis look deceptively cheap, and their durations are grossly underestimated. Risk managers should sit up and take notice.
Author: Andrew J. Kalotay
Publisher: Andrew Kalotay Associates
Published: 03/05/2021
Pages: 186
Binding Type: Hardcover
Weight: 0.92lbs
Size: 9.00h x 6.00w x 0.50d
ISBN13: 9781736594704
ISBN10: 1736594702
BISAC Categories:
- Business & Economics | Investments & Securities | Bonds
- Business & Economics | Investments & Securities | Portfolio Management
- Business & Economics | Finance | Financial Risk Management