Innovations

A Framework for Corporate Treasury Performance Measurement

Journal of Applied Corporate Finance (Winter 2005)

The innovative method detailed in this paper allows for meaningful periodic reporting of a debt manager’s performance relative to a custom benchmark portfolio.

An Option-Theoretic Prepayment Model for Mortgages and Mortgage-Backed Securities

International Journal of Theoretical and Applied Finance (December 2004)

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.

The Volatility Reduction Measure

Derivatives Strategy (March 2001)

An Andrew Kalotay Associates innovation, the VRM pinpoints the degree to which a hedge offsets the volatility of a particular asset, liability or portfolio. Retrospective testing on historical data and prospective testing through Monte Carlo simulation can be combined into a single hedge effectiveness score by properly weighting the inputs into the VRM formula.

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