Bond Valuation and Structuring

How to Succeed in Derivatives without Really Buying

Journal of Applied Corporate Finance (Fall 1993)

Understanding the derivatives market can help a treasurer distinguish between good and bad pricing in the cash market. By using a synthetic benchmark for comparison, Andrew Kalotay Associates persuaded Niagara Mohawk to reject a seemingly attractive refunding transaction that would have squandered roughly $1.5 million in potential cash savings.

A Model for Valuing Bonds and Embedded Options

Financial Analysts Journal (May/June 1993)

This seminal article explains in concrete detail and in layman’s terms how to compute a fair value for any bond, including callables and other structures with one or more embedded options. The technique requires building a binomial interest rate tree that models the evolution of interest rates and the yield curve.

The Management of Sinking Funds: The World Bank Experience

Journal of Fixed Income (June 1993)

An illustration of the complexities and challenges of sinking fund management, showing the power of the refunding efficiency concept.

The Sure Thing – Bond Refunding: How Operations Research Made Its Mark on Wall Street

OR/MS Today (April 1993)

How Bell System treasurers came to embrace Dr. Kalotay’s idea of refunding efficiency.

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