Lynanda offers a range of consulting services related to asset valuation, derivatives pricing, risk measurement and other quantitative finance needs of client organizations. In providing these services, Lynanda combines state of the art knowledge of quantitative finance research with practical experience in financial companies and other business organizations.

Lynanda believes the ability to develop new quantitative finance approaches through research as well as apply those approaches in practice is critical to innovation in risk management. Risk management is a rapidly developing discipline that depends profoundly on finance theory, so the most effective client strategies, solutions and financial decisions will be based on consulting advice and results from a firm capable of offering innovative ideas and techniques. As a leader in quantitative finance and risk management innovation, Lynanda can deliver the advice and results that assure clients are strong and competitive.

Delivering innovative results requires practical experience as well as knowledge. Lynanda's consulting team has extensive experience both as practitioners in the banking, securities and investment industries and as management consultants to these industries. The team has experience in economies and cultures as diverse as those of Japan, France, Germany and the United States, so we are sensitive to differences across geography and socioeconomic systems. The team also has experience at a senior executive level and as traders and investment bankers with major capital and derivative market participants as well as in more technical areas such as quantitative finance and information systems. This breadth and depth of experience allows Lynanda to deliver the highest quality results to clients for comparatively low consulting fees, since individual team members can perform multiple roles in consulting engagements.

Range of Consulting Services

Lynanda offers a variety of consulting services to clients, extending from executive-level strategy to highly technical quantitative analysis to financial advice. Although consulting engagements usually fall into one of the categories discussed below, clients have often engaged us for multiple services. Frequently, these engagements have started with strategy and advanced to broad solutions and then continued to more technical analysis. The specific services delivered are always geared to the specific needs and resources of each client.

Corporate Risk Management Strategies

Risk management is an increasingly important aspect of the strategic management of corporations and other organizations. The desire to maximize shareholder value and maintain a prudent level of financial risk have emphasized the need to better understand the risks implicit in a particular corporate strategy and to develop organizational, process and system frameworks to support performance and risk management. Lynanda's strategy consulting services help clients understand the risks inherent in their corporate strategies and assist clients in the design of the corporate infrastructure for performance and risk management. These services also assist clients in making decisions on the composition and selection of their portfolio of businesses and with related transactions, such as mergers and acquisitions. Examples of consulting engagements where Lynanda has provided strategic risk management advice include:

•  An assessment of the risk-adjusted profitability of the adjustable-rate mortgage banking market in the United States for a major Canadian banking organization. This engagement concluded that the adjustable-rate market would be more profitable than the fixed-rate mortgage market only if an implausible degree of irrationality by consumers existed, resulting in the sale of the client’s U.S. mortgage banking subsidiary;
•  A review of a France Regional Bank’s existing asset/liability and risk management policies, procedures and software systems, development of a methodology and testing parameters for an earnings simulation model, implementation of a matched-maturity funds transfer pricing system, and design of a mark-to-market valuation approach for managing interest rate risk;
•  A blueprint for the organizational structure and transfer pricing system for organizational performance measurement, development of policies and procedures for transfer pricing, and recommendations on risk limits for a major Japanese banking institution;
•  A strategic performance and risk management framework based on active portfolio management and utilizing unified market and credit risk modeling developed for and adopted by executive management of a large German financial institution.

Risk and Performance Management Solutions

Management processes, methodologies and information systems provide the basis for implementing risk and management strategies. When properly designed and implemented, these capabilities offer a “solution” to an organization’s risk and performance management needs by integrating the capabilities in a consistent way. The solution gives the organization a systematic and continuous ability to measure its financial risk and performance and to undertake managerial decisions and actions to assure tolerable risk and high performance. In practice, developing solutions typically requires a high level of expertise in valuation and risk measurement technology and an ability to apply that expertise within the infrastructure of client organizations.

Lynanda has an intimate understanding of valuation and risk measurement technology. Lynanda also has extensive experience in implementation of risk and performance solutions in a wide range of client organizations. We offer this knowledge and experience help other client organizations satisfy their requirements for risk and performance solutions. Some examples of consulting engagements where Lynanda has provided risk and performance management solutions include:

•  An approach to measuring and reporting on regulatory risk exposure of a complex fixed-income and derivatives portfolio of a major European financial institution. This approach encompassed requirements definition, development and testing of prototype software, and production of initial regulatory reports;
•  An optimal funding strategy and a performance measurement system for a major U.S. insurance and financial services holding company, including the design of a transfer pricing system and interest rate risk measurement system. Lynanda also supplied yield curve analytics for project implementation;
•  Designed the entire internal transfer pricing, risk transfer and performance measurement system for a major Japanese banking organization, including recommendations on organizational structure, management processes and risk management policies and procedures. Also assisted system implementation.

Risk and Performance Modeling

Quantitative finance models are the basis for valuing and analyzing the cash flows of risky portfolio positions and for measuring the financial risk of a portfolio. In particular, Lynanda has been instrumental in providing models of the term structure of interest rates and other market prices, reduced-form and structural models of the default risk of counterparties, valuation models for complex derivative instruments, smoothing models for interpolation of yield curves and other forward curves, and measurement of Value-at-Risk, Cash-Flow-at-Risk and Earnings-at-Risk. Lynanda's capability to develop innovative new models or enhance existing models is available as a consulting service to clients requiring external resources for model development, testing and application. Lynanda has extensive experience in providing modeling services to a broad spectrum of financial services and other clients, including the following engagements:

•  Development of improved valuation and risk measurement models for a major Japanese banking institution, covering the valuation of oil options and futures, Hong Kong stock index futures, and bond options and the measurement of interest rate risk;
•  Development and application of models used to determine the true interest rate sensitivity of mobile home and recreational vehicle loans for the U.S. subsidiary of a major European banking institution. Established the impact of interest rates on prepayment for both types of loans and further demonstrated the impact of seasonality and loan age on prepayment. Lynanda also designed hedging strategies to mitigate the interest rate risk of the client’s loan portfolios; Developed models for valuing a new type of putable “step-up coupon” deposit offered by the Japanese postal savings system on behalf of a major Japanese banking institution and trained client personnel in valuation analysis using the model;
•  A risk management and rating approach to the new Japanese asset securitization market, including prototype models for assessing the risk of asset pools and analytical training in the use of the models, for a Japanese credit rating agency;

Risk Assurance and Expertise

Corporate boards and senior management of many organizations require an independent review of current or proposed business strategies, policies and processes prior to approving managerial actions or decisions. Likewise, when managerial actions or decisions within an organization or by an outside party have produced substantial losses and pending litigation, boards and senior executives may need to investigate the causes and extent of losses and involve outside experts in the defense or prosecution of the matter being litigated. When these reviews and investigations relate to the financial risk management of an organization or other party, Lynanda can provide the risk management expertise needed for proper review and analysis of the issue. Examples of consulting engagements where Lynanda provided risk assurance and expertise include:

•  A review of the credit derivatives activities of a U.S. credit insurance provider that included an audit of the valuation methodology for credit derivatives, an examination of credit derivative policies and procedures, tests for the accuracy of the client’s credit derivative valuation software, and an overall certification of the quality of credit derivative usage;
•  An assessment of the risk exposure and disclosure associated with the $500 million loss in 1998 on a total return swap arranged by JP Morgan involving SK Securities, a Korean securities firm. This assessment was undertaken on behalf of the legal counsel to SK Securities and involved a review of all internal risk management documents at JP Morgan, including risk management policies and procedures, a daily revaluation of the total return swap, an evaluation of the fit with the risk profile and tolerance of SK Securities, and an analysis of the JP Morgan disclosure.