Abstract: Methods and systems are disclosed for determining valuation and risk analysis of municipal debt instruments on an after-tax basis. In one embodiment, bond terms, yield curve and interest rate volatility data are received for a set of bonds. Additionally, IRS treatment data and applicable tax rates for the set of bonds and a purchaser of the bonds are also received. Theoretical tax-neutral values of the bonds are calculated using a buy-and-hold methodology, wherein the tax-neutral value comprises the price of the at least one municipal debt offering such that its discounted after-tax value equals the price. A theoretical maximum after-tax values of the bonds are also calculated using a recursive valuation path-dependent methodology. Optimal bond management is determined using the calculated theoretical tax-neutral values and maximum after-tax values of the bonds.

Abstract: A method and system for selecting a preferred debt instrument (e.g., mortgage) for an individual consumer, where the option adjusted spreads (OAS) and risk measures of a plurality of debt instruments are determined and ranked using standard bond valuation methodology. A typical scenario involves a consumer inputting a plurality of mortgages and associated features (e.g., term of loan or type of interest rate) and receiving the option adjusted spread and risk measure for each mortgage, from which the consumer may select the appropriate mortgage having the lowest option adjusted spread within his or her risk tolerance. These steps can be implemented by a computer which includes a central processing unit (CPU) and a computer code operatively associated with the CPU. The relative option adjusted spreads and risk measures of various debt instruments can be displayed on a visual display or used to automatically commence the financing of a mortgage.

Abstract: A method and system for calculating an indicator which can be used for determining whether to refinance an outstanding debt instrument (such as a mortgage) with a new debt instrument (such as another mortgage), which includes the steps of (1) determining the change in the present value of the cash flows using a set of discount factors; (2) determining the change in option values using a probabilistic model of future discount factors; and (3) determining the indicator reflecting whether refinancing is probabilistically financially advisable by comparing the change in cash flow values with the change in option values. These steps can be implemented by a computer which includes a CPU and a computer code operatively associated with the CPU. The calculated indicator or its derivative, reflecting whether refinancing is probabilistically financially advisable, can be displayed on a visual display, communicated by an audio device or used to automatically commence refinancing.

Abstract: A financial product which is comprised of a note and a bond. The note is linked to the bond in that when an interest rate declines, the note interest rate also is reduced in a predetermined manner and the bond interest rate is reduced in a preselected manner. The interest rate on the note and the bond never go up or in an alternative embodiment go up significantly less than the interest rate increase. Also provided is a method for financing a loan by using a note and linked bond, both of whose interest rates can decline but do not rise. The financial product and the method can be implemented by a computer.

Abstract: A method and system for determining effectiveness of a hedge on a hedged item is disclosed. The method and system includes determining a standard deviation of changes in value of a hedged item over a known time frame; determining a standard deviation of a combination of the changes in value of the hedged item and changes in value of a hedging vehicle over the known time frame; and, determining a ratio between the determined standard deviations. In another aspect of the invention, a volatility reduction measure is determined as the compliment of the determined ratio and effectiveness is determined when the volatility reduction measure is above a known level.

Abstract: A method for structuring a mortgage having an associated current interest rate based upon a time-varying market interest rate, whereby as the market interest rate declines with time the current interest rate for the mortgage declines and when the market interest rate increases with time the current interest rate remains unchanged. The method includes the steps of: calculating the current interest rate for the mortgage at a first time dependently upon the market interest rate at the first time; and, calculating a reset interest rate for the mortgage at a second time dependently upon the market interest rate at the second time. If the reset rate is less than the current rate, the current rate is reset or updated to the reset rate and the mortgage is operated using the reset current interest rate. If the reset rate is equal to or greater than the current rate, the mortgage is operated using the current interest rate.