Hostname: page-component-586b7cd67f-2plfb Total loading time: 0 Render date: 2024-11-28T18:10:32.329Z Has data issue: false hasContentIssue false
  • English
  • Français

The Bond Refunding Decision in an Efficient Market

Published online by Cambridge University Press:  19 October 2009

Alan Kraus
Get access Rights & Permissions [Opens in a new window]

Extract

The majority of corporate bonds are callable before maturity at the option of the issuer. Unlike other security options (warrants, convertible bonds, etc.), the call provision cannot be resold; its value can be realized only by exercising it. The problem is to choose the optimal time to perform refunding (including the alternative of not refunding before maturity).

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 8 , Issue 5 , December 1973 , pp. 793 - 806
Copyright
Copyright © School of Business Administration, University of Washington 1973

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

[1]Bierman, H. Jr. “The Bond Refunding Decision as a Markov Process.” Management Science, August 1966, pp. 545–551.CrossRefGoogle Scholar
[2]Elton, E. J., and Gruber, M. J.. “Dynamic Programming Applications in Finance.” Journal of Finance, May 1971, pp. 473–505.Google Scholar
[3]Fama, E. F. “Efficient Capital Markets: A Review of Theory and Empirical Work.” Journal of Finance, May 1970, pp. 383–417.CrossRefGoogle Scholar
[4]Kalymon, B. A. “Bond Refunding with Stochastic Interest Rates.” Management Science, November 1971, pp. 171–183.CrossRefGoogle Scholar
[5]Myers, S. C. “Discussion” (of [2]). Journal of Finance, May 1971, pp. 538–539.Google Scholar
[6]Pye, G. “A Markov Model of the Term Structure.” Quarterly Journal of Economics, February 1966, pp. 60–72.CrossRefGoogle Scholar
[7]Pye, G. “The Value of the Call Option on a Bond.” Journal of Political Economy, April 1966, pp. 200–205.Google Scholar
[8]Weingartner, H. M. “Optimal Timing of Bond Refunding.” Management Science, March 1967, pp. 511–524.Google Scholar