Debt Management

Taking the Friction out of Saving Interest

BondWeek (July 14 2003)

The ratchet bond (an Andrew Kalotay Associates innovation) is a convenient, cost-effective surrogate for a callable bond, which achieves interest savings from declining interest rates without ongoing transaction cost.

Insuring Callable Bonds: Selecting the Right Payment Plan

The Journal of Risk Finance (Spring 2003)

An option valuation framework lets callable bond issuers meaningfully compare the cost of bond insurance purchased through periodic payments over the bond’s life, versus paying a single up-front premium.

Testing Hedge Effectiveness for FAS 133: The Volatility Reduction Measure

Journal of Applied Corporate Finance (Winter 2001)

The VRM, a ratio-based statistic invented and patented by Andrew Kalotay Associates, fulfills the spirit of FASB’s recommendations for hedge effectiveness testing, while correcting their major shortfalls. It can be used for both prospective and retrospective testing.

Earnings Impact of Derivatives under Hedge Accounting

FAS 133 and the New Derivatives Accounting Landscape (Fall 2001)

A demonstration of how to project the earnings impact of a highly effective hedge, using accepted risk management methods. While the illustrative case involves a fixed coupon bond hedged with a plain-vanilla interest rate swap, the approach is completely general and can be applied to a broad range of asset classes and hedging strategies.
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