MuniOAS News

BlackRock Deploys Kalotay After-Tax Muni Valuation Methodology

Kalotay and BlackRock Announcement

Kalotay Analytics is excited to announce that BlackRock has licensed our patent-pending after-tax methodology for municipal bond valuation and risk management. Our “tax-aware” valuation provides the foundation for accurately calculating OAS and effective duration under any interest rate scenario. With its enterprise-wide implementation, BlackRock mutual fund, ETF, and Aladdin risk customers will benefit from the most accurate and useful information for evaluating the risk/reward potential of their municipal bond holdings.

Kalotay and BlackRock Press Release (Oct. 25, 2016)

The Bond Buyer Coverage (Oct. 25, 2016)


BlackRock's Perspective on "Tax-aware" Effective Duration

"We believe the addition of the after-tax functionality differentiates BlackRock in the industry and provides investors with an enhanced understanding of interest rate risk in municipal bond portfolios.

... the new enhanced methodology better reflects how municipal securities trade in the financial markets and, as such, can provide portfolio managers with greater insight when employing strategies such as hedging of municipal securities."

BlackRock Customer Notification: Changes to the Methodology for Calculating ‘Effective Duration’ (Sept. 26, 2016)


Andrew Kalotay on the Need for Tax-Efficient Muni Evaluation

"The reality is that standard platforms grossly underestimate the effect of rising rates.

During recent years of historically low interest rates, with most municipal bonds trading at a premium, investors have paid little attention to the adverse effect of taxes on the prices of discount bonds. As a result, investors have neither seriously challenged, nor required currently used platforms to provide correct interest rate risk measures for bonds trading near or below par.

Although interest is tax-exempt, the gain resulting from purchasing a muni at a deep discount - below the so-called de minimis threshold - is subject to severe tax treatment. It is taxed as ordinary income at maturity at a rate of about 40% for the typical investor.”

The Bond Buyer (June 2015)- Muni Buyers: Beware of Tax-Deficient Analytics

High Performance OAS

BondOAS and MuniOAS PerformanceClick to enlarge

Demo and Deployment

MuniOAS Live Demo

MuniOAS Product Information

Foundation and Theory

Journal Of Investment Management (2014)

The Interest Rate Sensitivity of Tax-Exempt Bonds under Tax-Neutral Valuation


Bloomberg Muni Conference
(April 2016)

Uses and Misuses of OAS: Risk Analysis and Callable Benchmark Curves

In the Press

The Bond Buyer (June 2015)

Muni Buyers: Beware of Tax-Deficient Analytics

Investortools (November 2015)

Investortools Incorporates Kalotay’s After-tax Muni Bond Analytics