This paper examines the pricing of convertible bonds and preferred stocks. The optimal policies for call and conversion of these securities are determined via the criterion of dominance. The techniques underlying the Black-Scholes Option Model are used to price convertible securities as contingent claims on the firm as a whole.

Using the option pricing methods developed by Black and Scholes as a general technique for contingent claims analysis, this paper examines a class of mutual funds known as Dual Purpose Funds. By constructing a simplified model for these funds under the ‘perfect hedge’ conditions of Black and Scholes, it is demonstrated that the asset value of the fund will always exceed the market value and that it is not inconsistent with market equilibrium or efficiency for the capital shares to sell at a discount. The simple model predicts price fluctuations in the seven dual funds studied quite well; however, there is a persistent downward bias in the predicted price level. Finally, refinements to the model are examined to determine the nature of the misspecification causing this bias.

This paper consolidates the results of some recent work on the relation between forward prices and futures prices. It develops a number of propositions characterizing the two prices. These propositions contain several testable implications about the difference between forward and futures prices. Many of the propositions show that equilibrium forward and futures prices are equal to the values of particular assets, even though they are not in themselves asset prices. The paper then illustrates these results in the context of two valuation models and discusses the effects of taxes and other institutional factors.