Other Papers and Articles
A Private Solution to a Public Problem: A Response from the Private Sector to the College Saving Crisis
Contact us for more information.
How to Cope with Rising College Costs
Contact us for more information.
Measuring the Risk Premium on the Market Portfolio
Contact us for more information.
Measuring the Duration of Floating-Rate Debt Instruments
Although the concept of duration was developed over 50 years ago, only recently have attempts been made to calculate the duration of a floating-rate debt instrument. Morgan (1986) developed a formula for the duration of a floating-rate bond within a continuous time framework and, together with Chance (1986), adapted the model to a discrete time framework. The usefulness of this model is limited because it is tied to a specific example. The Chance-Morgan procedure is used to develop a computational formula within a discrete time framework that incorporates the sensitivity of the coupon rate index into changes in market interest rates. The formula assumes a flat term structure, but it can be extended to account for different shapes of and movements in the term structure.
Financial Engineering
Financial engineering allows the creation of innovative financial instruments and processes and the formulation of creative solutions to complex financial problems. A new security is innovative only if it: 1. enables an investor to realize a higher aftertax-risk-adjusted rate of return without adversely affecting the issuer's aftertax cost of funds, and/or 2. lets an issuer realize a lower aftertax cost of funds without adversely affecting investors. The basic causal factors reflected in innovative financial processes are: 1. efforts to reduce transaction costs, 2. steps to reduce idle cash balances in response to higher interest rates, and 3. the availability of relatively inexpensive computer technology that facilitates quicker financial transactions. Creative solutions to corporate finance problems have concentrated on developing the most efficient strategy for calling high-coupon debt when interest rates decline.
Make Securities Innovation Work to Your Advantage
Contact us for more information.
Structures and Contracts which Reallocate Risk
Contact us for more information.
An Overview of Corporate Securities Innovation
Contact us for more information.
Sources of Value Added from Structuring Asset-Backed Securities to Reduce or Reallocate Risk
Contact us for more information.
Designing Securities to Qualify as Capital for Bank Regulatory Purposes
Contact us for more information.
