Lending, and the pricing of the promise to repay.
11 topics · 11 curated works
No prior grounding assumed.
Investor Bulletin: Fixed Income Investments — When Interest Rates Go Up, Prices of Fixed-Rate Bonds Fall
U.S. Securities and Exchange Commission, Office of Investor Education and Advocacy · 2013
Explains why a rise in prevailing interest rates mechanically lowers the market price of existing fixed-rate bonds, and why longer maturities amplify…
Assumes you know the vocabulary.
Empirical Research on Sovereign Debt and Default
Michael Tomz & Mark L. J. Wright · 2013
Reviews the empirical record on sovereign default and finds it at odds with simple theory: default is followed by only modest and short-lived…
+1 more at this level
Primary sources and full treatments.
Some Theoretical Problems Suggested by the Movements of Interest Rates, Bond Yields and Stock Prices in the United States since 1856
Frederick R. Macaulay · 1938
Proposes measuring a bond's effective maturity as the weighted average time to its cash flows rather than its stated term, the origin of what is now…
+7 more at this level
11 works
U.S. Securities and Exchange Commission, Office of Investor Education and Advocacy
Explains why a rise in prevailing interest rates mechanically lowers the market price of existing fixed-rate bonds, and why longer maturities amplify this sensitivity.
Michael Tomz & Mark L. J. Wright
Reviews the empirical record on sovereign default and finds it at odds with simple theory: default is followed by only modest and short-lived reductions in trade and borrowing access, undermining the standard punishment-based explanation for why countries ever repay.
link checked 17 Sept 2026Gary Gorton & Andrew Metrick
Walks through how securitization pools and tranches loans into tradeable securities, and traces how the same structures that diversify idiosyncratic risk concentrated systemic risk in the run-up to the 2008 crisis.
link checked 17 Sept 2026Frederick R. Macaulay
Proposes measuring a bond's effective maturity as the weighted average time to its cash flows rather than its stated term, the origin of what is now called duration.
link checked 17 Sept 2026Robert C. Merton
Treats a firm's equity as a call option on its assets, so that credit spreads and default probabilities fall out of option pricing instead of requiring a separate theory of default.
Robert J. Shiller & J. Huston McCulloch
Surveys competing theories of the yield curve -- pure expectations, liquidity premium and market segmentation -- and finds the empirical tests generally reject the strict expectations hypothesis while forward rates still carry real information about future rates.
link checked 17 Sept 2026Francis X. Diebold & Canlin Li
Reinterprets the Nelson-Siegel yield curve formula as a dynamic three-factor model of level, slope and curvature, and shows this simple reparameterisation forecasts the yield curve better than standard no-arbitrage term structure models.
link checked 17 Sept 2026John Y. Campbell, Jens Hilscher & Jan Szilagyi
Builds a model predicting corporate default from accounting and market variables and finds firms with the highest predicted distress risk have delivered anomalously low average stock returns, the opposite of what a risk-based pricing story would predict.
link checked 17 Sept 2026Dimitri Vayanos & Jean-Luc Vila
Models the yield curve as arising from arbitrageurs intermediating between investors with fixed preferred maturity habitats, so that supply and demand shocks at one maturity affect yields at other maturities only through limited arbitrage capital.
link checked 17 Sept 2026Patrick Bolton, Xavier Freixas & Joel Shapiro
Models rating agencies as facing a conflict between fee-driven incentives to inflate ratings and reputational concerns, and shows the conflict is worst exactly when investors are most naive and competition among agencies is most intense.
link checked 17 Sept 2026Simon Gilchrist & Egon Zakrajšek
Decomposes corporate bond credit spreads and finds the part left over after accounting for expected default risk is a powerful predictor of future economic activity, because it captures shifts in the risk-bearing capacity of the financial sector.
link checked 17 Sept 2026