This paper develops the demand and pricing relationships for individual quot;strippedquot; index linked bonds (ILB's) and derives the increased welfare gains generated by the issuance of these synthetic securities. An individual quot;strippedquot; ILB is created by stripping a CPI linked ILB...

Tax regulations may make it impossible for investors to agree on the relative prices of financial assets. When this occurs, tax arbitrage occurs, and the equilibrium must be supported by market frictions. But tax arbitrage in goverenment bonds is economically costly in three ways. First, it...