The authors examine whether contingent claims analysis (CCA) completely explains the price relationships within a company’s capital structure. According to CCA, a company’s bond and stock values must invariably move in the same direction. Sometimes CCA suggests the presence of an anomaly or pricing discrepancy. CCA proponents assert that such an anomaly provides an opportunity for gains through riskless arbitrage. The authors contend that CCA provides only a partial representation of reality because the model cannot capture some factors that justify a price above or below the level that the model predicts.