Research

In creating fixed-income analytic models, Andrew Kalotay Associates draws upon pioneering research published by Dr. Kalotay and his associates over more than three decades. A member of the Fixed Income Analysts Society’s Hall of Fame, Dr. Kalotay’s innovations include the ratchet bond and ratchet mortgage; the Volatility Reduction Measure (for hedge effectiveness testing under FAS 133); and the concepts of refunding efficiency as applied to both corporate and municipal bonds and mortgages. He has authored or co-authored more than 50 journal articles on a wide range of topics. 

MBS

Bond Valuation and Structuring

Debt Management

Municipal Finance

Trade Press

Wealth Management

Consumer Finance

Innovations

 

Recent Research

Mortgage Servicing Rights and Interest Rate Volatility

Mortgage Risk (May 2008)

Standard prepayment models produce faulty results when valuing mortgage servicing rights. More reliable conclusions are obtained from an option-based prepayment model that includes volatility of interest rates as an input.

Refunding Efficiency: A Generalized Approach

Applied Financial Economics Letters (Vol. 3, 2007)

This paper sets out an improved method for determining when it’s efficient to call and refinance a bond, by correctly accounting for the call option value of both the new bond and the outstanding bond.

A Pointer on Points

OR/MS Today (June 2007)

Should a homebuyer pay upfront points in return for a lower mortgage rate? A proper answer requires comparing each alternative’s “option adjusted APR” – a refinement of the standard mortgage rate that adds the value of the option to refinance if interest rates decline.

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