President
Kalotay Advisors LLC
Dr. Kalotay is an authority on quantitative analysis of municipal bonds, including risk management, debt management, and tax management. He has been a prolific contributor to both academic and practitioner literature. His book, “The Interest Rate Risk Management of Municipal Bonds’, was published in 2021, and his ‘tax-neutral OAS’ method of valuing municipal bonds received a patent in 2024.
In 2021 he sold his firm Andrew Kalotay Associates, which he founded in 1990, to the Intercontinental Exchange. His firm provided bond analytics to some of the most sophisticated market participants. Previously, he was with Salomon Brothers and Dillon Read. Prior to Wall Street, he was at Bell Telephone Laboratories and AT&T.
On the academic side, he directed the first graduate Financial Engineering program in the U.S. at Polytechnic University (now part of New York University), from 1994 to 1997. Previously he taught at Wharton, Columbia, and Fordham University.
He holds a B.Sc. and M.Sc. from Queen's University and a Ph.D. from the University of Toronto, all in mathematics. He was inducted into the Fixed Income Analyst Society’s "Hall of Fame" in 1997.
Most municipal bonds have been structured with a 5% coupon, callable at par in Year 10. Issuers pay for the considerable cost of the par call by accepting a lower sale price. Subsequent refunding, by calling or another means prior to the call date, generates cashflow savings but forfeits valuable call options. This session will explain how to factor the forfeited option value into the refunding decision using the refunding efficiency approach. Five percent bonds callable at par are virtually certain to be refunded by Year 10, even if interest rates increase. To reduce the cost of recurring transactions, the presenter will also explore alternative call structures.