Complex Financial Instruments
Complex financial instruments are inherently difficult to analyze, value, and explain – particularly in high-stakes disputes and regulatory matters.
Brattle supports law firms, financial institutions, corporations, investors, and regulators in Australia and across the Asia-Pacific region in complex commercial litigation, arbitrations, investigations, and enforcement actions involving derivatives, structured products, and credit instruments.
Our experts analyze market structure, trading activity, pricing and valuation, risk characteristics, and industry practices, and assess economic loss and damages in matters involving both domestic and cross-border transactions. Our global team brings together deep industry experience and rigorous economic and financial modelling expertise.
We have experience across a broad range of complex financial instruments and credit analytics, including exchange-traded and over-the-counter (OTC) derivatives, exotic derivatives, credit default swaps and indices, credit risk management, incentive stock options, mortgage- and asset-backed securities, collateralized debt and loan obligations (CDOs and CLOs), and other bespoke financial instruments.
Areas of Expertise
- Valuation and damages relating to complex financial products across asset classes, including equities, rates, volatility, foreign exchange (FX), cryptocurrencies, private credit, and commodities
- Financial modelling of exotic and path-dependent derivatives
- Portfolio performance, attribution, and risk management, including volatility exposure, hedging strategies, and their effectiveness
- Analysis of derivatives close-outs, including termination and close-out amounts
- Assessment of interest rate and credit-risk benchmarks
- Evaluation of credit models and scoring methodologies
- Analysis of suitability, fee structure, and disclosures to investors
- Collateral considerations, including liquidity, marketability, and haircuts
- Economic interpretation of transaction documents and market standards
Representative Engagements
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ISDA Close-out Seminars
Brattle consultants presented at ISDA-sponsored seminars to market participants around the world, including Sydney and Singapore, on considerations and best practices related to the close-out of a hypothetical derivatives portfolio. Areas discussed included pre-default monitoring, contractual and operational issues relevant to default and close-out, collateral enforcement, and practical and technical/valuation issues in determining a close-out amount.
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Alternative Interest Rate Benchmarks
To prepare for a permanent discontinuation of certain key interbank offered rates and the subsequent amendment of standard documentation to implement fallback rates for derivatives, ISDA engaged Brattle to analyze market participant responses to ISDA’s presented approaches and frameworks across several major capital markets including Australia and Japan. Our team reported areas of consensus and identified areas of potential concerns, ensuring that ISDA and market participants have a comprehensive understanding and a transparent picture of the responses.
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Exposure of a Financial Institution to Alleged LIBOR Manipulation
Brattle provided consulting and expert support on behalf of a financial institution related to the impact of alleged LIBOR manipulation. Our team analyzed exposures of the financial institution’s global trading desks’ positions across both derivatives and cash products – including Australia and APAC – and performed sensitivity analyses with respect to counterfactual LIBOR rates. Brattle’s client favorably settled the matter.
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Real-Options Valuation of Copper-Gold Mining Project
In a matter before the International Centre for the Settlement of Investment Disputes, Brattle was retained by the claimant to value a large copper and gold mining project at the feasibility study stage. Academic Advisor Professor Graham Davis provided expert testimony implementing the real-options method to value the project.
The analysis included calibrating stochastic price processes for copper, gold, and crude oil – a key cost driver – based on historical futures and forward prices for each commodity, and using those calibrated processes to drive a simulation-based discounted cash flows model. In addition to price risk, the simulation incorporated operational and political risks as additional sources of uncertainty, quantified based on objective inputs. The tribunal adopted the valuation framework presented by Professor Davis and rendered a $5.9 billion award.
Contact Our Experts
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Principal
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San Francisco
Mr. Gkatzimas specializes in financial markets disputes related to trading, valuing, and investing in securities and portfolios across asset classes, including digital assets.
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Associate
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Sydney
Dr. Drummond is a financial economist with extensive research experience relating to financial market microstructure, asset pricing, and behavioral finance.
