In collaboration with Valu8, we acted for Kempen & Co in validating the valuation and hedging of the Inflation Breaker, a portfolio of ground lease contracts.

The contracts in the portfolio generate monthly cash flows based on the rent. Rents increase annually, with the Dutch pricing inflation index. At maturity of the contract, the tenant has the option, but not the obligation, to buy back the land.

This was not the first time Kempen & Co decided to entrust this validation to Valu8 and Ugly Duckling. This shows that Ugly Duckling is a key player in software, management and finance with an integrated approach that delivers. The work done was a continuation of previous validation work where we checked the cash flow model, the interest rate curve construction methodology and the inflation model. The previous implementation was improved and migrated to Matlab (previously Excel/VBA), which required a new validation.