John B. Long, Jr., Eduardo S. Schwartz, Financial Theory and Taxation in an Inflationary World: Some Public Policy Issues: Discussion, The Journal of Finance, Vol. 34, No. 2, Papers and Proceedings, Thirty-Seventh Annual Meeting, American Finance Association, Chicago, Illinois, August 29-31, 1978 (May, 1979), pp. 385-386

This paper studies the costs of applying single-factor exercise strategies to American swap options when the term structure is actually driven by multiple factors. Using a multifactor string market model of the term structure, we find that even when single-factor models are recalibrated to match the market at every exercise date, the exercise strategies they imply can be suboptimal. Based on estimates of notional amounts outstanding, the total present value costs of following single-factor strategies could be several billion dollars. These results illustrate the importance of using well-specified term structure models.

This note explores the properties of some stock markets indices that are claimed to approximate a continuously rebalanced equally weighted portfolio.

Michael J. Brennan, Eduardo S. Schwartz, An Equilibrium Model of Bond Pricing and a Test of Market Efficiency, The Journal of Financial and Quantitative Analysis, Vol. 17, No. 3 (Sep., 1982), pp. 301-329

Michael J. Brennan, Eduardo S. Schwartz, Analyzing Convertible Bonds, The Journal of Financial and Quantitative Analysis, Vol. 15, No. 4, Proceedings of 15th Annual Conference of the Western Finance Association, June 19-21, 1980, San Diego, California (Nov., 1980), pp. 907-929

Michael J. Brennan, Eduardo S. Schwartz, Finite Difference Methods and Jump Processes Arising in the Pricing of Contingent Claims: A Synthesis, The Journal of Financial and Quantitative Analysis, Vol. 13, No. 3 (Sep., 1978), pp. 461-474

Savings bonds, retractable bonds and callable bonds are each equivalent to a straight bond with an option. Neglecting default risk the value of these contingent claims depends upon the riskless interest rate. This paper employs the option pricing framework to value these bonds, under the assumptions that the interest rate follows a Gauss-Wiener process and that the pure expectations hypothesis holds.

This paper considers the equilibrium pricing of equity-linked life insurance policies with an asset value guarantee; such policies provide for benefits which depend upon the performance of a reference portfolio subject to a minimum guaranteed benefit. The benefit is decomposed into a sure amount and an immediately exercisable call option on the reference portfolio. A numerical procedure for determining the value of the call option is presented and the risk minimizing investment strategy to be followed by the issuer of the policy is derived.