In OTC bond markets many investors face high costs of trade, and these costs appear to berelated to the lack of price transparency. We study the consequences this has for efficient pricediscovery. Prices of municipal bonds react sluggishly to macroeconomic news. Yield spreads overtreasuries...

This paper analyzes the relation between agency conflicts and risk management in a contingent claims model of the firm. In contrast to previous contributions, our analysis incorporates not only stockholder-debtholder conflicts but also manager--stockholder conflicts. We show that the costs of...