Investments

Prepare to Defend Your IRR Management Initiatives

By Tom Parliment
March-April, 1993

This is Tom Parliment's CMO Cow article. It deals with the following issues:

Purchase of mortgage-backed securities by financial institutions with the objective of enhancing yield.
How the secondary market segments mortgage cash flows.
How the prepayment risk is redistributed.

Integrating Total Rate of Return Into Dynamic Interest Rate Risk Analysis

By Tom Farin
March-April 1994

In this article, Tom Farin looks at total rate of return analysis (TRR). In the first part of the article TRR is used in ranking a series of investment opportunities. He then suggests how it might be integrated with interest rate risk analysis.

Using total rate of return as a free standing tool - in making investment decisions.
Calculating TRR on investments in different rate environments.
Integrating total rate of return with dynamic IRR analysis.

Fort Knox Savings & Keep

By Tom Farin and Tom Parliment
July-August 1994

This case study looks at an overcapitalized institution and suggests a number of retail and wholesale strategies aimed at solving its financial performance problems.

Loan growth funded with wholesale borrowings
- Short-term fixed-rate mortgages.
- Home equity line bundle.
Leverage using a wholesale/wholesale strategy.
- Corporate debt.
- LIBOR ARM

Lessons in Leveraging - Managing EPS Through Low-Margin Transactions

By Tom Parliment
July-August 1994

In this article, Tom Parliment discusses the use of a number of investment transactions to leverage an institution, improving ROE. For each, he discusses the risks inherent in the strategy.

Examples applied to Fort Knox Savings case
Interest rate risk mismatch.
Incurring credit risk.
Floating rate CMO.
ARM securities.
PAC bond.

Total Rate Of Return - Does it Make Sense in Evaluating HTM Portfolios?

By Tom Farin
September-October 1994

In this article, Tom Farin looks at the issue of whether it makes sense to use TRR analysis when managing portfolios that are held to maturity and therefore will see no fluctuation on book value.

TRR Investment example.
Impact of FAS 115 on TRR.
- Held-to-maturity election.
- Available-for-sale election.
- Trading election.
Opportunity cost associated with holding under water securities.

Managing Portfolio Ladders: Part One

Managing Portfolio Ladders: Part Two

By Tom Parliment

This article is the first in a two part series looking at using laddered maturities in managing an institution's investment portfolio.

How FAS115 Affects laddering strategies.
Three portfolio ladder strategies.
- Static held-to-maturity ladder.
- Flexible held-to-maturity ladder.
- Available-for-sale-portfolio.