In this paper, we apply Markowitz's approach of portfolio selection to government bond portfolios. As a main feature of our analysis, we use term structure models to estimate expected returns, return variances, and covariances of different bonds. Our empirical study for the German market shows...

We explore the relationship between CDS premia and bond asset swap spreads on the same reference entity. As Duffie (1999) shows, there is a clear theoretical link between CDS premia and bond prices if the two quantities are viewed as a pure measure of credit risk. However, many studies provide...

We develop a reduced-form model that allows us to decompose bond spreads and CDS premia into a pure credit risk component, a pure liquidity component, and a component measuring the relation between credit risk and liquidity. CDS liquidity has important consequences for the bond credit risk and...