Complex Financial Instruments
Securities cases often involve a range of highly sophisticated investment vehicles. These include many derivative and fixed income instruments with which we are familiar: options, warrants, swaps, commodity-based futures and futures options, auction rate securities, and currency options, as well as structured notes on assets.
From our firm's earliest days, we have actively participated in landmark cases involving complex financial instruments.
Common Threads in Mortgage-Backed Securities Cases
Managing Principal Mark Howrey and Vice President Adam Decter point out key questions that need to be addressed in these complex litigations.
Our work has involved:
- Ex ante and ex post valuations
- Evaluation of investment portfolio performance
- Valuation of financial instruments using sophisticated valuation techniques
- Evaluation of market efficiency
- Portfolio risk audits and evaluation of risk management
- Analysis of trading strategies in hedge funds, including short selling and front running
We have analyzed questions of risk characteristics and risk transfer for clients including leading investment banks, hedge funds, private equity firms, and ratings agencies.
Instruments Involved in Subprime Lending Litigations
Relevant to subprime lending investigations, we have:
- Evaluated prepayment and default risk in mortgage backed securities (MBSs);
- Analyzed risks and valuation of collateralized debt obligations (CDOs).
We have also analyzed complex instruments in the context of bankruptcy-related litigations involving all types of assets and liabilities including purchased mortgage servicing rights, interest rate swaps, bonds, stocks, leases, real estate, collateralized mortgage obligations, and accounts receivable.