We examine empirically the response of bond returns and their volatility to good and bad macroeconomic news in economic expansions and recessions. We find that the information content of macroeconomic announcements is mostimportant when it contains bad news for bond returns in expansions and,...

We use an affine asset pricing model to jointly value stocks and bonds. This enables us to derive endogenous correlations and to explain how economic fundamentals influence the correlation between stock and bond returns. The presented model is implemented for G7 post-war economies and its...

Do bond investors demand credit quality or liquidity? The answer is both, but at different times and for different reasons. Using data on the Euro-area government bond market, which features a unique negative correlation between credit quality and liquidity across countries, we show that the...

This paper presents a pricing model of commercial and industrial (C&I) loan prepayment option. Modeling of prepayment is essential in pricing mortgage contracts since prepayment truncates the timing and amount of expected cash flows. Lenders normally charge a penalty for prepayment, for example...