State and local government officials that engage in interest-rate swaps, swap options, and other derivative products need to do the best they can to keep abreast of the market value of their products, a pair of swaps experts said Monday.
John Dukich, president and chief executive of Ferential Systems, and Alfred Mukunya, a senior managing consultant at Public Financial Management, addressed a crowd of issuers and market professionals at The Bond Buyers Fifth Annual Derivatives/Short-Term Finance conference.
You need to know your swaps, Dukich said. There can be a tremendous amount of money involved in not measuring the value of a swap.
Mukunya said its important to evaluate derivative products for accounting purposes, follow audit guidelines, provide timely information to credit rating companies, and help investors keep track of swaps and any impact they might have on the credits they hold.
Every issuer should be able to answer where the market is, where their swap stands in the market, and what the current dollar value of that swap is on a mark-to-market basis, he said.
Both Dukich and Mukunya said the issuers should be able to get ballpark estimates of their swaps in house, though they shouldnt hesitate to contract advisers, especially for more complicated transactions. Whats more, being informed about the market value of swaps and derivative products can help make meetings between issuer officials and market professionals more balanced and more productive, Dukich said.
The more information, the better, Dukich said. Youll know what theyre talking about, theyll know what youre talking about, and theyll know that you know what theyre talking about.
