In collaboration with Valu8, we acted for Kempen & Co on a model validation.
In collaboration with Valu8 we performed a model validation for Kempen & relating to the methodology used to valuate and hedge the Inflation Breaker, a portfolio of ground lease contracts. The contracts in the portfolio generate monthly cash flows based on the rent which 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.
As part of the validation we checked the cash flow model, the interest rate curve construction methodology and the inflation model. Finally, the implementation of the models in Excel/VBA was checked, and the code used to implement the models was validated.