Methods for measuring hedging value-at-risk and profitability

US8275686B2 · kind B2 · utility

Assignee

• THE BANK OF NEW YORK MELLON · US

Inventors

• Stephen J. AHN · Yonkers, US
• Oded Hauser · Matawan, US
• John J. Yao · New York, US

Key dates

• Filing date: Jan 24, 2007
• Grant date: Sep 25, 2012
• Expiry date: Apr 16, 2029

Classification

• Technology area (CPC G): Physics
• CPC primary: G06Q40/06
• WIPO field: IT methods for management
• WIPO sector: Electrical engineering

Abstract

Systems and methods for measuring value-at-risk and profitability of hedging in relation to BMA debt obligations are provided using rigorous statistical solutions that address problems associated with municipalities involved in swap hedging face. Various embodiments permit users to quantify POL hedging basis risk through a VAR-style loss measurement and statistics measuring the profitability of a hedge, those statistics including gain durability and gain/loss ratio. Various aspects introduce significant innovation to risk management practices, particularly for tax-exempt issuers of debt. Certain embodiments of this disclosure facilitate better management of hedging risk, analysis of hedges using POL vs. BMA and provide guidance for analyzing the risk existing in an existing portfolio of POL swap hedges to better inform decision-making regarding use of hedging risk for profit or to lay off risk.