Eight days after the Super Bowl, NFL fans worldwide are still talking about that play call. With 2nd and goal at the Patriots one-yard-line, trailing 28-24 with less than a minute on the clock, the Seahawks had strong alternatives at their disposal. Their powerful running back Marshawn Lynch, nicknamed Beast Mode for his ability to run through would-be tacklers, had bulldozed to more than 100 yards in the game already. Their ever-elusive quarterback Russell Wilson had slipped through the fingers of blitzing defenders more than once. Run a single yard, and their opponents would fall behind with less than thirty seconds to kick a game-tying field goal. Instead, the Seattle coaching staff stunningly selected a slant pass to their wide receiver, Ricardo Lockette, whose route would take him straight into the heart of the densely-concentrated Patriots run-stopping defense. The pass…

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Financial Institutions Case Study: Asset Liability Management Our Client: A regional bank with a newly issued brokered CD portfolio. Situation: Our client was asset-sensitive and had just issued 5yr brokered CDs that paid a fixed rate of interest. The client lends to borrowers at a floating rate of interest plus a credit spread, with a nominal floor. The net interest margin (NIM) would benefit from rising rates in the future, but in the short-term NIM was compressed by the long-term funding rate relative to the floored variable rate loan portfolio. Summary: Chatham Financial assisted the client with alternative hedging scenarios to reduce the impact of its relatively high, fixed-rate long-term funding. The client was considering a receive-fixed swap vs. a floating rate with sold floor based on the Prime rate, with the intention to designate the combined swap/floor against its…

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Real Estate Case Study: Debt Ratio Our Client: A public real estate company specializing in asset management in the hospitality sector. Situation: Our client had paid down a significant portion of their floating rate line of credit, leaving them with a fixed/floating rate debt ratio higher than they desired. With hotel assets essentially re-pricing daily, the client wanted to increase their floating rate exposure on the liabilities side to better match the characteristics of their assets. Summary: We discussed entering into a receive-fixed swap to rebalance their fixed-floating mix. A secondary benefit of this strategy was that it allowed them to reduce their current interest expense due to the steepness of the yield curve; the receive fixed swap synthetically transformed a higher fixed rate obligation into a lower floating rate obligation, based on an historically low current LIBOR setting. Because…

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Less than a month ago, mathematician Christopher McKinlay made waves when he unveiled his quantitative methodology for hacking an online matchmaking website called OkCupid to find his soul mate. Thoroughly discontented with the low yield of his online dating profile – a paltry six first dates in nine months – McKinlay decided to make a change. Instead of continuing to look for love just like any other user of the site would, he created a targeted algorithm to bring mathematical rigor to Cupid’s search mechanism. First, he created twelve fake accounts, enabling him to gather more than six million data points from 20,000 women around the country. From this mountain of information, McKinlay used a Bell Labs algorithm to create seven statistical attribute clusters based on questions and answers, then figured out which two attribute clusters (indie artists and professional…

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Less than a month ago, mathematician Christopher McKinlay made waves when he unveiled his quantitative methodology for hacking an online matchmaking website called OkCupid to find his soul mate. Thoroughly discontented with the low yield of his online dating profile – a paltry six first dates in nine months – McKinlay decided to make a change. Instead of continuing to look for love just like any other user of the site would, he created a targeted algorithm to bring mathematical rigor to Cupid’s search mechanism. First, he created twelve fake accounts, enabling him to gather more than six million data points from 20,000 women around the country. From this mountain of information, McKinlay used a Bell Labs algorithm to create seven statistical attribute clusters based on questions and answers, then figured out which two attribute clusters (indie artists and professional…

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Chatham helps clients with unique currency and interest rate risk management needs, such as accessing hedging even in illiquid frontier market currencies, or through assessing, monitoring, and managing unhedged investments. Chatham has deep technical expertise in local currency investments in emerging and frontier markets. Chatham’s history in the microfinance sector dates back to the early 2000’s, which led to the formation of a team specifically foccused on inclusive finance in 2008. This team provides a broad range of advisory services to Microfinance, SME, and other impact-oriented sectors and has grown to become the industry’s leading risk management advisor. Chatham has executed hedging transactions in over 50 currencies globally. We have investigated, analyzed and provided indications for clients considering investments in over 30 other currencies. Our broad market expertise helps Chatham to identify and evaluate the available alternatives in any situation.…

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Adding clarity and precision to derivative valuations Failure to properly measure the fair value of a derivative instrument can result in significant losses for a company. It can also lead to sub-optimal pricing when executing a derivative transaction. This translates into real economic losses over the life of the instrument. In addition, using outdated valuation modeling techniques or not understanding how derivative fair values are measured often lead to additional scrutiny from management, auditors, and regulators, further increasing costs to a company. Benefits of Chatham Derivative Valuation Services Independent third-party perspective: We cover all types of interest rate, foreign currency, and commodity derivatives, from caps and all types of swaps including cross-currency to FX forwards, options, and exotic derivatives. As a trusted third party that is independent and objective, Chatham offers a robust platform with proprietary methodology that provides real-time…

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At-a-glance management to save time and costs For investors, managing debt terms, payments, covenants and other details can quickly become a job that a spreadsheet alone can’t handle. While even the most sophisticated spreadsheets can track and provide some analysis, it doesn’t generate sophisticated, transparent reporting. Beyond analysis, the use of spreadsheets raises the risk of common entry mistakes, file corruption and broken formulas. Managing these obstacles costs valuable resources, time, and money, ultimately preventing data-driven decisions. The ChathamDirect Debt Management system helps clients ease the burdens of managing and reporting their debt portfolio. This web-based system centralizes all debt information and performs tasks such as tracking covenants, building payment budgets, and managing critical event dates. The system serves to guide the workflow for debt management processes while organizing key documents. The application goes beyond tracking debt with debt insights.…

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It’s difficult to recall the earth-shattering events of the 20th century without asking the moving question: what if they had been prevented? What if radar operators had correctly identified the Japanese warplanes approaching Pearl Harbor on December 7th, 1941 as a massive attack wave, rather than assuming it was the scheduled arrival of six B-17 bombers? What if NASA managers had listened to the solid rocket engineers’ concerns that the ultra-cold temperatures on January 28th, 1986 would compromise the rubber O-rings that sealed together the Challenger’s boosters? And what if Secret Service agents had left the plastic cover on the presidential limousine on November 22nd, 1963, potentially obscuring President Kennedy from an Ordnance Optics scope? Over the years, many historians and pundits have speculated intensely about that fateful November day – 50 years ago this Friday – when Kennedy was…

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