Derivatives, Closeout Disputes, and Risk Analysis

The Brattle Group provides consulting and expert testimony on the theory, valuation, use, and regulation of derivatives. The Brattle Group’s staff and affiliates include professors and former practitioners in risk management and derivatives, including a Nobel Prize winning economist, a former director of risk management at a large broker-dealer, and an author of a leading graduate level textbook on risk management and derivatives.

The range of derivatives instruments we are retained to analyze and value is wide and can be originated and traded a number of different ways: exchange-traded like a futures contract, over-the-counter as a counter party’s obligation (such as a swap), publicly offered as a trust-issued claim against the trust’s own assets like a collateralized mortgage obligation (CMO), or a hybrid instrument such as a synthetic collateralized debt obligation (CDO) sold as a 144A private placement. Our analysis often concerns how derivatives were used and whether they were used for reducing financial risk, through hedging, or for taking risk as part of an investment strategy.

Brattle’s experts analyze the economic value and performance of instruments in terms of the underlying assets, payment conditions, and trading venue. They also evaluate suitability and performance of derivatives whether used as investments or to hedge. We are frequently retained to assist in risk management activities, particularly in the energy sector, advising on the risks an enterprise should assume and those that it should avoid; on management control and reporting structures that monitor and measure risks; and on practices (insurance, hedging, counterparty credit reviews, etc.) that are used to manage the risks.