Term Structure and the Non-Cash Values in Bonds
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Market frictions enable bond prices to impound values other than the present value of their cash flows. When the term structure of interest rates is estimated with particular care, using a linear programming approach, one can uncover and quantify such non-cash values. This provides some answers to questions about tax clienteles, the representative bond investor, the value of bond liquidity, apparently negative call option values and other anomalies.
Source: First Boston Working Paper Series
Beim, David. "Term Structure and the Non-Cash Values in Bonds." First Boston Working Paper Series, First Boston, December 1992.