Security markets and valuation


Bates White professionals are experts in valuing equity, fixed-income, and derivative securities. Our experts have valued a variety of equity and fixed-income securities in a myriad of contexts and industries, accounting for liquidity discounts, control premia, and option features. Our experts also have extensive experience in valuing derivative securities including equity options, warrants, swaps, credit derivatives, conversion features, and real options. Bates White brings both significant industry and academic experience to the valuation of structured products such as mortgage-backed securities and collateralized debt obligations (CDOs), which underlie much of the current subprime mortgage litigation. Our option pricing experience includes valuing options to buy physical assets in breach of contract cases, valuing risky debt as an option on the firm’s assets, determining the option value of having liquidity, and estimating the value of future damages that are realized only if they exceed a certain threshold. Our work using option-pricing methods in valuing insurance contracts has been especially important in developing compelling analysis that sets us apart from our competitors.

Our ability to apply the appropriate valuation techniques in a wide variety of contexts allows us to create a truly customized and mathematically solid analysis of your case, whether simple or highly complex.

  • Providing consulting support for a securities exchange on issues relating to high frequency trading of securities.
  • Provided consulting services for outside counsel representing a special committee formed to evaluate allegations in a shareholder derivative action involving a monoline insurer. Analysis focused on insurer’s policies for and models related to underwriting financial guarantees on subprime RMBS, closed-end second and HELOC ABS, and multisector CDO securities. Evaluated the insurer’s processes and procedures, including its deal origination, underwriting, pricing, cash flow modeling, risk modeling, and surveillance activities.
  • Submitted an expert report and provided testimony in federal court on behalf of a Fortune 100 company. Estimated the value of insurance and other financial assets that were proposed to be transferred to a 524(g) trust for a bankrupt subsidiary of a Fortune 100 company. Evaluated an analysis of the parent company’s ability to pay current and future claims as well as the post-reorganization ability of the subsidiary to continue as a going concern.
  • Submitted an expert report for and provided testimony on behalf of an insurance company in a dispute with the policy holder. Demonstrated how the value of not being able to access certain policies to pay future asbestos-related liabilities could be estimated using an option-based approach.
  • Provided expert testimony rebutting merger-related allegations of fraudulent misrepresentation. Analyzed plaintiff- and defendant-related news and stock trading histories, the pre-announcement effect of mergers on stock prices, and merger-related stock price premia. Estimated the value of plaintiff and defendant equity but for the merger, accounting for firm, industry, and market events, as well as option features, liquidity discounts and control premia. Calculated the discounted present value of plaintiff’s funded debt but for the merger. Assessed damages as the difference between the true value of plaintiff and debtor assets and liabilities exchanged.
  • Submitted expert reports for and provided testimony on behalf of an insurance company in a dispute between the company and its auditor. Analyzed the company’s subprime commercial lending portfolio and estimated losses on various high-risk loans. Developed damage calculations pursuant to two damage theories: one related to losses on a specific set of loans and a second related to losses on the entire portfolio of borrowing and investments.