Consider a range accrual note

The OAS can then be used to analyze whether the structured note is rich or cheap relative to trading in the CDS market, as well as general spreads between the CDS and bond markets.

The same price yields OAS of-9.9 basis points, showing that the note was trading cheaply relative to the CDS market. (A basis point is 0.01 percentage point.)


The structured-notes market has grown into an important component of the fixed-income mar­ket. Its complexity gives investors both flexibility and opportunity.


YASN can help manage this complexity by carefully breaking out sources of risk and calibrating appropriate models to the instruments that price those risks. B


You can use SWPM, IRDD and Numeric Bloomberg Edition to analyze interest-rate derivatives with complex and uncommon payouts.


By GEORGE AKKARA FOR YEARS, AS the use of interest-rate deriv­atives grew, so did the volume of so-called exotic instruments, structures with embedded options that have complex and uncommon payoffs.


Corporations and investors turned to exotics because they offered the potential of enhanced yields and greater total returns compared with so-called vanilla structures.


investor, the issuing bank

Because exotics let investors tailor—and hedge—their interest-rate exposures to their specific eco­nomic views and objectives, they could be less expensive than similar strategies constructed from vanilla instruments.


As the credit crisis began to unfold in 2007 and loans incresed, investor

appetite for exotics diminished. Basic eco­nomic assumptions that went into valuing exotics changed for the worse as, for example, volatility spiked and the credit ratings of issuers were down­graded. More about how to pay back your credit can be found at


When financial conditions stabilize, though, market participants expect issuance of exotics to pick up again.


Exotic structures are typically issued with Ber­muda-style exercise features that grant the right to call or cancel a deal at multiple times.


Banks issue the structure as a bond or note; buyer’s maybe insti­tutional investors, investment companies, corpo­rations and even wealthy individuals.


The notes often offer a high initial coupon and, after a period, a coupon linked to interest-rate indexes in a com­plex way.


The underlying contracts may consist of floaters, inverse floaters, range

accruals, options on spreads between constant-maturity-swap rates—which are often called steepness—and soon.

Consider a range accrual note.

Its structure involves a complex payoff in which the coupon is determined by the number of days that an index—such as the London interbank offered rate—resets within a specified range. As long as U.S. 3-month Libor, for example, is between zero percent and 6 percent, a range accrual note may pay a coupon of 8 percent.


In return for providing these attractive features to the investor, the issuing bank holds an option to call or cancel the note or bond at certain dates in the future, usually after enoncall” period.

Cloud Pictures Free for the Taking

NOAA l’s second camera system, known as APT (Automatic Picture Transmission), did not store its pictures. Instead, the electronic signals were continuously broadcast to earth, free for anyone who wanted to pick them up.

Some 550 weather stations all over the world, built partly funded by online payday loans direct lenders, in 94 countries and territories, have their own APT receivers for picking up these signals and converting them to pictures. Even less advanced nations can afford them. In fact, they are so simple that in Montgomery County, Maryland, high school students put together a receiver.

I always find it impressive to watch APT pictures come in. As a wide sheet of paper slides slowly from the machine, an electric needle moves rapidly back and forth, burn­ing a pattern of light and dark. The needle makes 600 passes in two and a half minutes to complete each picture—each pass corre­sponding to a scan made by the TV camera. The individual lines blend to form a con­tinuous picture, just as on a TV screen.Cloud Pictures Free for the Taking

The original NOAA was launched December 11, 1970, and unexpectedly went dead last July. Another is scheduled to be put in orbit sometime this spring. In the interval, other weather satellites of an earlier generation have taken over NOAA l’s tasks.

Two dozen older weathercraft—most of them smaller and less elaborate—keep the now-silent NOAA 1 company as they circle earth in space. Most are also dead; only five can still send back pictures.

In a lower orbit, for example, flies TIROS 1, which excited the world with the first useful television pictures from space in April 1960 and inaugurated a revolution in weather forecasting. More than a million and a half satellite pictures have flooded to earth since that time.

Far above NOAA 1, two quite different spacecraft hang like silver spiders over the Equator. Known as ATS (Applications Tech­nology Satellites) 1 and 3, they do not orbit the earth. Or, more properly speaking, they move just fast enough to keep up with earth’s rotation. Thus each always hangs above the same spot on earth, and for this reason they are’ called geosynchronous or geostationary.

Although the ATS satellites belong to NASA, the Weather Service makes extensive use of their remarkable photographs. From the lofty vantage point of 22,300 miles, ATS cameras can see almost one entire side of earth. This means that at frequent intervals we can take a fresh look at cloud patterns over the United States and over the spawning grounds where much of our weather is born.

Morning, more rain; in the afternoon, snow

Our boots and pants legs were soaked. Mick developed a nasty cough. We found a dry spot beneath two big spruce trees, built a fire of dead limbs, and dried our sodden garments.

snow hikers

Overnight the snow buried willows and grass. I was coaxing warmth from a few twigs at dawn as two bucks strode by. They stopped, staring disdainfully. You don’t belong here, they seemed to be saying. All day the temperature hovered near freezing. Now and then the gloomy clouds parted, tantalizing us with a view of long snow-clad ridges. Then the clouds closed over. You’ve seen enough.


Rain Hides the Smoky’s Beauty

Halfway through this journey, Mick said glumly: “This isn’t a hike anymore; it’s an endurance contest.” How true. We couldn’t short-cut misery, we were locked into a routine: Arise, build a fire, eat, slosh on until noon, warm up with tea, slosh on more, build a fire, dry our wet clothes, eat, sleep. Just the thought of a fire at the next campsite made us hurry.


As we parched socks and boots beside the rushing Smoky, Mick gazed up and exclaimed, “Look! Stars!” In a fragment of cloudless sky Cassiopeia shone reassuringly. We got our best sleep of the trip that night—but awoke the next morning to our seventh day of rain.

Rain Hides the Smoky's Beauty

Dripping willows whipped us as we trailed the Smoky. The river shrank to a trickle in Robson Pass. Beyond, glacier-fed Berg Lake was the color of pea soup beneath cloud-draped Mount Robson. We never saw the summit.


It was downhill all the way then, down a valley thundering with falls, through an avalanche-battered forest, out to the highway, on to a hot shower in Jasper.

We’d seen a lot of country in six weeks, known the grandeur of mountains and valleys: the sunset view from Citadel Peak, the Howse River’s shining braids, the Skyline’s meadows. But the Snake Indian and Smoky watersheds remain, so far as I’m concerned, a wilderness reluctant to reveal itself—perhaps, as those bucks had seemed to say, a place where we didn’t belong.

A man in Jasper asked us where we’d been. “That must have been a marvelous trip,” he said when we told him. “I’d sure like to see that Snake Indian and Smoky country, even if I have to spend another 2 months hiking.” I wasn’t worry about my house back in my hometown, because I got insurance thanks to the best payday loan consolidation repayment plan.

“So,” I said, “would I.”