Experts at Gnarus provide independent and objective analyses, litigation support, and expert testimony on damages issues regarding disputes in litigation, arbitrations, and mediation.
Our economic analysis services are primarily focused on allegations and issues relating to disputes in class action certification, real estate economics, sports economics, banking & financial services, and valuation of complex traded- and non-traded instruments as well as real options using our proprietary ESOVAL (R) models.
Our areas of expertise include:
Gnarus expertise in banking and financial services includes providing banks, thrifts and their non-bank financial services subsidiaries and affiliates with technical and managerial consulting services on a wide range of compliance-related issues relevant to mortgage banking. The areas in which our expertise has been applied include:
- Model validation analyses of an institution’s loan loss reserving methodology involved the review and assessment of its risk rating methodology, as well as an institution’s prepayment and retention models as part of a company-wide initiative to validate key models used for asset valuation and risk management.
- Forensic review of loan files to identify potential indicia of fraud, violations of regulations or other wrong-doing. In the area of high-cost lending, we have provided lenders with on-site due diligence reviews, as well as review and assess for federal and state compliance. In addition, we have valuated loan origination data to identify loans that do not conform to state high-cost laws and regulations and determined the required refund that would cause these loans to no longer meet the criteria for a high-cost home loan under the state law or regulation.
- In the area of fair lending, we have provided extensive econometric assistance for class action lawsuits, and performed due diligence investigations that include the statistical analyses of loan underwriting decisions, loan pricing, and steering risk factors.
Economic analysis is an important and valuable tool in a wide range of class action litigation. Gnarus experts have consulted and testified in a wide range of areas that include issues relating to class certification including property value diminution, product liability, and employment and labor. Issues addressed include the commonality of economic injury, methodologies for estimating class-wide damages, and evaluation of survey techniques.
Gnarus experts provide consulting and expert testimony in an array of matters involving real estate economics in litigation matters. These claims include such factors as contamination or proximity to contamination, exposure to electric and magnetic fields, catastrophic events such as fires and explosions, and changes in development potential. Our experience covers the entire range of approaches used from traditional appraisal techniques to state-of-the-art GIS mapping systems and statistical techniques including repeat sales, hedonic regression models, and survey techniques.
- Expert analyses based on both appraisal and real estate economics methodologies including, when appropriate, neighborhood comparison analysis and hedonic regression analysis.
- Deposition and testimony on the effects of contamination or proximity to contamination on property values.
Professional sport is more than a game. Each of the four major US sports organizations operates under its own economic structure and rules, each somewhat different—they function under a combination of anti-trust (or partial anti-trust) exemptions, salary caps, wage scales and revenue sharing agreements. Gnarus experts and consultants have experience in analyzing the implications of the highly individualized market structure of the NFL in particular and in sports leagues in general. We bring our vast experience in data analysis, in-depth research, analysis and advanced quantitative modeling to analysis of many aspects of the business of sports leagues, from labor negotiations, analyzing salary cap implications, to personnel decisions—both players and staff.
Gnarus professionals are experts in the valuation of complex traded-instruments (basket options and Parisian options) and non-traded instruments (swing options and instruments awarded in compensation programs). Our expertise encompasses the following areas:
Instruments awarded in compensation programs including:
- traditional employee stock options (ESOs)
- complex non-traditional instruments, such as capped, indexed, barrier and market-based ESOs; and
- stock appreciation rights.
Our professionals are also experts in:
- valuation of real options to estimate the optimal value of complex capital assets, such as power plants.
Gnarus ESOVAL Models
To perform these valuations, we have developed a suite of state-of-the-art lattice- and Quasi Monte Carlo-based Equity and Stock Option Valuation (ESOVAL®). These models are designed to value virtually any complex instrument or real option (“asset”) accurately. These assets typically have path dependent (Asian and look-back) and complex payoff mechanisms and decisions that can be made at virtually any point in time (“American” exercise). They also typically require the use of sophisticated stochastic processes to describe uncertainty in asset prices, model parameters (volatility, dividend yields and correlations) and other sources of uncertainty, such as weather.
The models and estimation methods our experts use to value the instruments awarded in compensation programs comply with both domestic (FAS 123R) and international standards (IFRS2) standards and have passed reviews and audits by the Big Four accounting firms. In addition, all of the ESOVAL® models have been shown to produce results that are close to those produced by well-known models in the literature.
What types of Clients use these services?
Public and Private Companies – Our experts use the ESOVAL® models to value instruments and real options for public and private companies, law firms and compensation design firms. We help public and private companies meet their reporting obligations by estimating the fair value (cost to the firm) of the employee stock options and other instruments awarded in their compensation programs. Our experts also help these companies with the valuation of traded and other types of non-traded instruments and real options.
Law Firms – Gnarus experts assist law firms and their clients by preparing and defending expert reports that provide damage estimates for the three types of assets discussed above. The damage estimates are used in such legal actions as backdating investigations, wrongful termination cases and disputes concerning the value of complex capital assets. Before developing our damage estimates, Gnarus experts work closely with outside counsel to determine the appropriate framework and model(s) to use to estimate values for both the actual and “but-for” worlds. For the reasons discussed above, our ESOVAL® models are generally viewed as producing more accurate and more defensible damage estimates than those produced by the models used by opposing experts.
Compensation Design Firms – Lastly, Gnarus experts help compensation design firms evaluate alternative instruments designs. Our models can provide virtually any measure of cost (to the firm), value (to the employees), efficiency and incentive strength.
For more information regarding the Valuation of Complex Instruments, please send an email to Ron Rudkin at rrudkin@gnarusllc.com
