Are Negative Option Prices Possible? The Callable U.S. Treasury-Bond Puzzle.

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Longstaff, Francis A;
  • Journal: Journal of Business,volume 65,issue 4 October,pages571-92
  • Related identifiers: doi: 10.1086/296586

Market prices for callable Treasury bonds often imply negative values for the implicit call option. The author considers a variety of possible explanations for these negative values including the Treasury's track record in calling bonds optimally, tax-related effects, t... View more
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