Research / Research Papers

DATE

2014
2013
2012
2011
2010 & Earlier

INVESTMENT TYPE

Structured Product
Stock/Preferred Stock
Mutual Fund
Fixed Income

 

ETF
Annuities
Alternative Investments

TOPIC

Portfolio Management
Securities Law
Valuation

Research Papers

Ex-post Structured Product Returns: Index Methodology and Analysis

Forthcoming in The Journal of Index Investing.

By Geng Deng, Tim Dulaney, Tim Husson, Craig McCann, and Mike Yan 2014-04-02

The academic and practitioner literature now includes numerous studies of the substantial issue date mispricing of structured products but there is no large scale
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Efficient Valuation of Equity-Indexed Annuities Under Lévy Processes Using Fourier-Cosine Series

By Geng Deng, Tim Dulaney, Craig McCann, and Mike Yan 2014-04-01

Equity-Indexed Annuities (EIAs) are deferred annuities which accumulate value over time according to crediting formulas and realized equity index returns. We
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The Fall of Willow

By Geng Deng and Craig McCann 2014-03-04

From May 8, 2000 until June 30, 2007, the UBS Willow Fund was invested in distressed obligations with offsetting but smaller cash and synthetic short debt positions
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Valuation of Structured Products

Published in The Journal of Alternative Investments, Spring 2014, Vol. 16, No. 4: pp. 71-87.

By Geng Deng, Tim Husson, and Craig McCann 2014-02-03

The market for structured products has grown dramatically in the past decade. Their diversity and complexity has led to the development of many diff erent
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Valuation of Reverse Convertibles in the VG Economy

Published in the Journal of Derivatives & Hedge Funds 19, 244-258 (November 2013).

By Geng Deng, Tim Dulaney, and Craig McCann 2014-01-07

Prior research on structured products has demonstrated that equity-linked notes sold to retail investors in initial public off erings are typically issued at above
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Crooked Volatility Smiles: Evidence from Leveraged and Inverse ETF Options

Published in the Journal of Derivatives & Hedge Funds 19, 278-294 (November 2013).

By Geng Deng, Tim Dulaney, Craig McCann, and Mike Yan 2014-01-07

We find that leverage in exchange traded funds (ETFs) can a ffect the "crookedness" of volatility smiles. This observation is consistent with the intuition that
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Modeling a Risk-Based Criterion for a Portfolio with Options

Forthcoming in The Journal of Risk.

By Geng Deng, Tim Dulaney, and Craig McCann 2013-12-13

The presence of options in a portfolio fundamentally alters the portfolio's risk and return pro files when compared to an all equity portfolio. In this paper, we
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Robust Portfolio Optimization with VaR Adjusted Sharpe Ratio

Published in the Journal of Asset Management, 14(5):293-305, 2013.

By Geng Deng, Tim Dulaney, Craig McCann, and Olivia Wang 2013-11-05

We propose a robust portfolio optimization approach based on Value-at-Risk (VaR) adjusted Sharpe ratios. Traditional Sharpe ratio estimates using a limited series
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Large Sample Valuations of Tenancies-in-Common

By Tim Husson, Craig McCann, Edward O'Neal, and Carmen Taveras 2013-10-28

In this paper, we value a large sample of tenant-in-common (TIC) investments based on cash flow projections found in 194 private placement memoranda. Our sample of
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The Priority Senior Secured Income Fund

Published in the PIABA Bar Journal, 20 (2): 191-206, 2013.

By Tim Dulaney, Tim Husson, and Craig McCann 2013-09-23

Retail investors are being sold increasingly obscure non-conventional investments. With the Priority Senior Secured Income Fund (PSSI), issuers may have finally
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Structured Product Based Variable Annuities

Published in the Journal of Retirement, Winter 2014, Vol. 1, No. 3: pp. 97-111.

By Geng Deng, Tim Dulaney, Tim Husson, and Craig McCann 2013-09-11

Recently, a new type of variable annuity has been marketed to investors which is based on structured product-like investments instead of the mutual fund-like
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Private Placement Real Estate Valuation

Forthcoming in the Journal of Business Valuation and Economic Loss Analysis.

By Tim Husson, Craig McCann, Edward O'Neal, and Carmen Taveras 2013-09-03

As a result of the Securities and Exchange Commission's relaxation of its prohibition against the marketing of private placements, investors will soon be exposed to
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Structured Certificates of Deposit: Introduction and Valuation

By Geng Deng, Tim Dulaney, Tim Husson, and Craig McCann 2013-07-30

This paper examines the properties and valuation of market-linked certificates of deposit (structured CDs). Structured CDs are similar to structured products --
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Using EMMA to Assess Municipal Bond Markups

Published in the PIABA Bar Journal, 20 (1): 99-122, 2013.

By Geng Deng and Craig McCann 2013-06-07

In the past, assessment of the reasonableness of municipal bond markups depended on anecdotal recollection of markups and subjective judgment about what was
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The Rise and Fall of Apple-linked Structured Products

By Geng Deng, Tim Dulaney, Craig McCann, and Mike Yan 2013-01-25

The rise in Apple's market capitalization in 2012 coincided with a dramatic increase in single-observation reverse convertibles, reverse convertibles and
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What is a TIC Worth?

Published in the PIABA Bar Journal, 19 (3): 373-392, 2012.

By Tim Husson, Craig McCann, and Carmen Taveras 2013-01-04

Tenants-in-common interests are passive real estate investments which are sold based on two claimed benefits: stable "cash on cash" returns and deferral of capital
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Dual Directional Structured Products

By Geng Deng, Tim Dulaney, Tim Husson, and Craig McCann 2013-01-03

We analyze and value dual directional structured products - or simply dual directionals (DDs) - which have been issued in large amounts since the beginning of
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Are VIX Futures ETPs Effective Hedges?

Published in The Journal of Index Investing, Winter 2012, Vol. 3, No. 3, pp. 35-48.

By Geng Deng, Craig McCann, and Olivia Wang 2012-06-27

Exchange-traded products (ETPs) linked to futures contracts on the CBOE S&P 500 Volatility Index (VIX) have grown in volume and assets under management in recent
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Isolating the Effect of Day-Count Conventions

By Geng Deng, Tim Dulaney, Tim Husson, and Craig McCann 2012-05-01

Day-count conventions are a ubiquitous but often overlooked aspect of interest-bearing investments. While many market traded securities have adopted fixed or
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Optimizing Portfolio Liquidation Under Risk-Based Margin Requirements

Published in the Journal of Finance and Investment Analysis, 2(1): 121-153, 2013.

By Geng Deng, Tim Dulaney, and Craig McCann 2012-04-06

This paper addresses a situation wherein a retail investor must liquidate positions in her portfolio -- consisting of assets and European options on those assets --
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A Primer on Non-Traded REITs and other Alternative Real Estate Investments

By Tim Husson, Craig McCann, and Carmen Taveras 2012-03-07

In this paper we provide a brief overview of the ways to achieve real estate exposure and focus our analysis on alternative real estate investments. The term
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CLOs, Warehousing, and Banc of America's Undisclosed Losses

By Tim Husson, Craig McCann, and Olivia Wang 2012-01-31

Collateralized Loan Obligations (CLOs) are issued by trusts which in turn invest the proceeds from issuing the CLO securities in portfolios of bank loans. This note
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Valuing Partial Interests in Trusts

By Geng Deng, Tim Husson, and Craig McCann 2011-12-15

The financial interests of a trust's beneficiaries are often diametrically opposed and conflict among trust beneficiaries is common. Although applicable law
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Rethinking the Comparable Companies Valuation Method

By Paul Godek, Craig McCann, Dan Simundza, and Carmen Taveras 2011-11-01

This paper studies a commonly used method of valuing companies, the comparable companies method, also known as the method of multiples. We use an intuitive
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The Properties of Short Term Investing in Leveraged ETFs

Published in the Journal of Financial Transformation, Fall 2012, Journal 35.

By Geng Deng and Craig McCann 2011-07-26

The daily returns on leveraged and inverse-leveraged exchange-traded funds (LETFs) are a multiple of the daily returns of a reference index. Because LETFs rebalance
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The VXX ETN and Volatility Exposure

Published in the PIABA Bar Journal, Vol. 18, No. 24, pp. 235-252.

By Tim Husson and Craig McCann 2011-06-16

Exposure to the CBOE Volatility Index (VIX) has been available since 2004 in the form of futures and since 2006 in the form of options, but recently new
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Modeling Autocallable Structured Products

Published in the Journal of Derivatives & Hedge Funds 17, 326-340 (November 2011)

By Geng Deng, Joshua Mallett, and Craig McCann 2011-03-15

Since first introduced in 2003, the number of autocallable structured products in the U.S. has increased exponentially. The autocall feature immediately converts
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Futures-Based Commodities ETFs

Published in The Journal of Index Investing, Summer 2011, Vol. 2, No. 1: pp. 14-24.

By Ilan Guedj, PhD, Guohua Li, PhD, and Craig McCann, PhD 2011-01-28

Commodities Exchange Traded Funds (ETFs) have become popular investments since first introduced in 2004. These funds offer investors a simple way to gain exposure
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Leveraged Municipal Bond Arbitrage: What Went Wrong?

Published in The Journal of Alternative Investments, Spring 2012, Vol. 14, No. 4: pp. 69-78.

By Geng Deng and Craig McCann 2010-10-25

In this article, we explain that, while marketed as an arbitrage strategy, the leveraged municipal bond strategy was simply an opaque high-cost, highly leveraged
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Auction Rate Securities

By Craig McCann and Edward O'Neal 2010-10-22

Auction Rate Securities (ARS) were marketed by broker-dealers to investors, including individuals, corporations and charitable foundations as liquid, short-term,
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Leveraged ETFs, Holding Periods and Investment Shortfalls

Published in the Journal of Index Investing, Winter 2010, Vol. 1, No. 3: pp. 45-57.

By Ilan Guedj, Guohua Li, and Craig McCann 2010-08-09

Leveraged and Inverse Leveraged ETFs replicate the leveraged or the inverse of the daily returns of an index. Several papers have established that investors who
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The Anatomy of Principal Protected Absolute Return Notes

Published in the Journal of Derivatives, Vol. 19, No. 2, pp. 61-70, 2011

By Geng Deng, Ilan Guedj, Joshua Mallett, and Craig McCann 2010-07-30

Principal Protected Absolute Return Barrier Notes (ARBNs) are structured products that guarantee to return the face value of the note at maturity and pay interest
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What TiVo and JP Morgan teach us about Reverse Convertibles

By Geng Deng, Craig McCann, and Edward O'Neal 2010-06-22

Reverse convertibles are short term, unsecured notes issued by brokerage firms including JP Morgan, Barclays, Citigroup, Morgan Stanley, Wachovia, Lehman Brothers,
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The Risks of Preferred Stock Portfolios

By Guohua Li, Craig McCann, and Edward O'Neal 2010-06-02

Preferred stocks are a hybrid of debt and equity. In this paper, we examine preferred stocks with an emphasis on the risks of holding portfolios of preferred
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Oppenheimer Champion Income Fund

By Geng Deng and Craig McCann 2010-05-14

During the second half of 2008, Oppenheimer's Champion Income Fund lost 80% of its value - more than any other mutual fund in Morningstar's high-yield bond fund
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What Does a Mutual Fund's Term Tell Investors?

Published in the Journal of Investing, Summer 2011, Vol. 20, No 2: pp. 50-57.

By Geng Deng, Craig McCann, and Edward O'Neal 2010-04-14

In a previous article, we highlighted a flaw in the average credit quality statistic frequently reported by bond mutual funds. That statistic understates the credit
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What Does a Mutual Fund's Average Credit Quality Tell Investors?

Published in the Journal of Investing, Winter 2010, Vol. 19, No. 4: pp. 58-65.

By Geng Deng, Craig McCann, and Edward O'Neal 2009-11-30

The SLCG study explains that the Average Credit Quality statistic as typically calculated by the mutual fund companies and by Morningstar significantly overstates
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Structured Products in the Aftermath of Lehman Brothers

By Geng Deng, Guohua Li, and Craig McCann 2009-11-04

SLCG's prior research showed that structured products were poor investments because they were significantly overpriced when offered and were, at best, thinly traded
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Charles Schwab YieldPlus Risk

By Geng Deng, Edward O'Neal, and Craig McCann 2009-07-20

From June 2007 through June 2008, investors in YieldPlus (SWYSX and SWYPX) lost 31.7% when other ultra short bond funds had little or no losses. Schwab had marketed
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Regions Morgan Keegan: The Abuse of Structured Finance

By Craig McCann 2009-01-20

Investors in six Regions Morgan Keegan (RMK) bond funds lost $2 billion in 2007. The RMK funds held concentrated holdings of low-priority tranches in structured
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An Economic Analysis of Equity-Indexed Annuities

By Craig McCann 2008-09-11

At the request of the North American Securities Administrators Association, Dr. McCann authored a White Paper on equity-indexed annuities in support of the SEC's
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A CMO Primer: The Law of Conservation of Structured Securities Risk

By Craig McCann 2007-06-30

The collapse of Brookstreet Securities and bailout of two Bear Stearns hedge funds have focused attention on collateralized mortgage obligations (CMOs). These
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Closed-end Fund IPOs

By Edward O'Neal 2007-06-29

Dr. O'Neal describes a pattern of consistent losses relative to NAV observed after the IPO of closed end funds. Closed-end funds IPO at a 5% premium to their NAVs
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Corporate and Municipal Bonds

By Michael Piwowar 2007-06-28

Corporate and municipal bonds are substantially more expensive for retail investors to trade than similar-sized trades in common stocks. Trading costs including
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Mandatory Arbitration of Securities Disputes

By Edward O'Neal and Dan Solin 2007-06-13

Dr. O'Neal and attorney/author Dan Solin today released a statistical analysis of the results of the mandatory arbitration process during the 1995 - 2004 period.
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Are Structured Products Suitable for Retail Investors?

By Craig McCann and Dengpan Luo 2006-12-02

Equity-linked notes - a type of structured product - are securities issued by brokerage firms and traded in the secondary markets like shares of common stock. These
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An Overview of Equity-Indexed Annuities

By Craig McCann and Dengpan Luo 2006-06-01

Equity-indexed annuities are complex investments sold by insurance companies that pay investors part of the capital appreciation in a stock index and guarantee a
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Annuities

By Craig McCann and Kaye A. Thomas 2005-12-10

Regulatory scrutiny of variable annuity sales practices and private litigation have focused on the investment risk of subaccounts, on annuity 'switching' and on the
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Optimal Exercise of Employee Stock Options and Securities Arbitrations

By Craig McCann and Kaye A. Thomas 2005-06-01

In this paper, Craig McCann and Kaye Thomas extend previous analyses of employee stock options and evaluate advice to hold unexercised
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Concentrated Investments, Uncompensated Risk and Hedging Strategies

By Craig McCann and Dengpan Luo 2004-12-01

In this paper, Dr. McCann and Dr. Luo explore the risk of holding concentrated investments and explain and evaluate risk management
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The Use of Leveraged Investments to Diversify a Concentrated Position

By Craig McCann and Dengpan Luo 2004-06-01

Brokerage firms recently recommended that investors holding a concentrated position in a single stock borrow and invest in a portfolio of additional stocks to
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Mutual Fund Share Classes and Conflicts of Interest between Brokers and Investors

By Edward O'Neal 2003-12-24

Dr. O'Neal describes the various mutual fund share classes and explains how differences in commissions to brokers and costs to investors across share classes can
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Churning - Revisited: Trading Cost and Control

By Craig McCann and Dengpan Luo 2003-09-01

In a previous paper, Dr. McCann outlined the portfolio approach to assessing the excessiveness of trading in churning cases. In this paper, Dr. McCann and Dr. Luo
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Detecting Personal Trading Abuses

By Craig McCann 2003-06-01

Recent actions by the New York State Attorney General have highlighted abusive personal trading practices by mutual fund portfolio managers. In this paper, Dr.
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Securities Class Action Lawsuits

By Craig McCann, Ph.D., CFA 2002-12-01

Investors sometimes sue publicly traded companies, executives, accountants and underwriters alleging that important information concerning the companies was omitted
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The Suitability of Exercise and Hold

By Craig McCann and Dengpan Luo 2002-06-01

Hundreds of lawsuits are currently working their way through the courts and arbitration panels over a strategy referred to as exercise and hold. The advice to
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Churning

By Craig McCann 2001-12-01

In this paper, Dr. McCann improves upon traditional indicators of churning and demonstrates that, properly calculated, the trading costs estimate of damages closely
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Bid-Ask Spread, Sales Credits and Brokers' Compensation

By Craig McCann and Richard G. Himelrick 2001-06-01

In this working paper, co-authored with Richard Himelrick, Esq., Dr. McCann explains the role of market makers and the provision of sales credits as a basis for
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McCann On Trading Models

By Craig McCann 2000-06-01

Stock trading models are used by economists to estimate damages in securities class action lawsuits. In this note, we explain the three types of models used by
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