Dissatisfaction occasionally has been expressed with traditional measures of duration for immunization on conceptual grounds. However, more elegant duration measures have not been found to be superior to the traditional ones in empirical tests of immunization efficacy. Under the assumption that the term structure of continuously compounded interest rates can be expressed as a polynomial, Chambers and Carleton (1981) demonstrate that the finite and noninstantaneous return of a default-free bond can be expressed as a vector product of a duration vector and a shift vector. This study derives immunization strategies from the model and tests them. The results of the portfolio tests indicate that the traditional duration approach of Macaulay provides enhanced immunization relative to maturity approaches or naive approaches. However, the duration vector approach produces further improvements.

Donald R. Chambers, Willard T. Carleton, Donald W. Waldman, A New Approach to Estimation of the Term Structure of Interest Rates, The Journal of Financial and Quantitative Analysis, Vol. 19, No. 3 (Sep., 1984), pp. 233-252

We investigate the market's reaction to original-issue deep discount (OID) bonds, which are issued at prices well below par and with coupons set below the market rate. Until July 1982 OID debt offered large tax advantages. Before that date stock-price responses to announcements of OID debt are significantly positive, in contrast to the negative, albeit insignificant, responses associated with par debt announcements. No stock-price gains are observed for OID debt issued after the tax advantages are removed. We conclude that in 1981–82 opportunities provided by financial innovation offset the negative information effects typically associated with debt-financing announcements.

Previous research indicates mixed conclusions on the potential mispricing of equity index put options. We examine the returns of put writing and other option strategies by comparing historical option returns with returns generated using option pricing models. We find it is generally possible to reject the hypothesis that put returns are consistent with option pricing models. An implication is that the average cost of buying out-of-the-money put options to provide tail-risk protection to a portfolio may include a significant premium. Our results are based on a sample period of 1987–2012 that includes periods of high volatility in equity returns.

Introduction to modern corporate finance economic foundations the economic system and contracting the time value of money the valuation of financial securities the techniques of capital budgeting risk and diversification the capital asset pricing model an introduction to options financial leverage financing in imperfect markets the dividend decision corporate ethics and shareholder wealth maximization estimating project cash flows advanced topics in capital budgeting financial analysis and planning working capital and management international finance mergers and reorganizations.