I use weekly Treasury‐bill rates with maturities of one to twenty‐six weeks to examine the information in forward rates during the 1970s and 1980s. Forward rates contain better information about future changes in spot rates than the information captured by autoregressivea nd vector‐autoregressivem odels. Forward rates also have considerable predictive power, which increased after October 1979 and remained strong after October 1982. The results show no necessary connection between interest rate predictability and the degree to which the Fed adheres to interest rate targeting.

The author provides evidence on the perceived existence of strong liquidity effect. The analysis is based on the response of the term structure of interest rates to the weekly Federal Reserve announcements of bank reserves during the post‐October 1979 period. It is shown that unanticipated changes in the mix between borrowed and nonborrowed reserves cause expected real interest rates to change after the announcement because they provide information about a future change in the supply of money. A precise model is developed and tested during subperiods of nonborrowed and borrowed reserves targeting by the Fed.

Robert A. Eisenbeis, Credit Granting: A Comparative Analysis of Classification Procedures: Discussion, The Journal of Finance, Vol. 42, No. 3, Papers and Proceedings of the Forty-Fifth Annual Meeting of the American Finance Association, New Orleans, Louisiana, December 28-30, 1986 (Jul., 1987), pp. 681-683

The author provides evidence on the perceived existence of strong liquidity effect. The analysis is based on the response of the term structure of interest rates to the weekly Federal Reserve announcements of bank reserves during the post-October 1979 period. It is shown that unanticipated changes in the mix between borrowed and nonborrowed reserves cause expected real interest rates to change after the announcement because they provide information about a future change in the supply of money. A precise model is developed and tested during subperiods of nonborrowed and borrowed reserves targeting by the Fed.

With the increasing use of adjustable‐rate mortgages for asset/liability management, there exists the need to properly evaluate their price sensitivity to interest rate changes. This paper provides a foundation by deriving the duration of an adjustable‐rate mortgage. The properties of this duration are unique and have some important differences from those of fixed‐rate securities. One important characteristic of an adjustable‐rate mortgage concerns the index used to adjust the mortgage rate. It was found that the index tended to be more important than the adjustment frequency in determining the duration of an adjustable‐rate mortgage.

The present value equation in finance is shown to be equivalent to the Laplace transformation in mathematics. Based on this observation, the list of known analytic solutions for the present value problem is increased from a handful to more than one hundred. General properties of the Laplace transform are examined as well in light of the newly discovered significance for finance.