This paper examines call behavior of corporate issuers of non-convertible bonds. Evidence from a sample of 102 calls indicates that the market value of the called bonds is usually below the call price at the time of the announcement. The stock price reactions to call announcements are positively related to the direction of the change in leverage. When the call relaxes restrictive covenants, the firm on average pays a larger premium to call debt. The premium is a minimum estimate of the potential opportunity costs of restrictive covenants.

Futures contract specification usually allow the short position some variation as to when, where, how much, and what is to be delivered. In this paper we derive the optimal delivery policy for the Treasury Bond futures contracts, and find that our policy produces profits that are positive and statistically significant. This indicates that future prices are ‘too high’ in that the short position can earn profits by skillfully exercising his delivery options. We find the actual delivery policies of market participants depart substantially from the optimal strategy. The implications of these findings for futures traders and bond dealers are discussed.