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Perspective
Fixed Income Fantasies
December 8, 2017
Active fixed income managers have had a really good run in recent decades, but is this success due to skill? We found that there is less alpha than people think due to long-term overweight to credit. But there is hope, and we explain why.
Data Set
Credit Risk Premium: Preliminary Paper Data
February 27, 2018
This data set is related to “Credit Risk Premium: Its Existence and Implications for Asset Allocation." Using data from both cash bond markets (1927–2014) and synthetic CDS markets (2004–2014), we document evidence of a sizable credit risk premium.
Working Paper
Financing Investment With Long-Term Debt and Uncertainty Shocks
February 6, 2012
This paper proposes a model of financing and investment for firms that attempts to explain both the weak correlation of Tobin’s Q with investment, and the higher correlation of bond yields with investment.
Working Paper
A Reduced Form CoCo Model With Deterministic Conversion Intensity
April 20, 2013
Some financial institutions issue contingent convertible bonds to cushion their capital reserves in times of crisis. This paper builds a contingent convertible bond model with a minimum of stochastic factors that can be calibrated to market prices of related securities.
Working Paper
Asset-Measurement Uncertainty and Credit-Term Structure
April 5, 2011
Studying the spike in financial market volatility in 2007, this paper tests whether credit investors’ uncertainty about a company’s asset values affects short-term credit spreads and the underlying credit term-structure.
Book
The Valuation of PAC Bonds Without Complex Models
January 1, 1999
Using static yields on mortgage securities is insufficient to make good investment choices. We present a simple model that can be useful in identifying value across at least one popular class of CMO securities: the Planned Amortization Class bond.
Book
Forward Rates and CMO Portfolio Management
January 1, 1999
Forward rates, because of their perceived role in forecasting future interest rates, occupy a special place in fixed-income analysis. We focus on how forward rates are used in analyzing CMOs and discuss when usage is warranted and misguided.
Book
Consistency of Carry Strategies in Europe
September 1, 2003
In this chapter, we focus on strategies in the European bond market that shift money from government bonds to higher-yielding credits. While most carry strategies seem to add value in the long run, some strategies appear more risky than others.
Interview
Meet the Expert: Jordan Brooks on Systematic Fixed Income
October 12, 2018
AQR Managing Director Jordan Brooks answers questions about systematic fixed income, including how AQR implements the strategy and what makes it different from smart beta.
Working Paper
Corporate Bond Specialness
February 1, 2007
The U.S. bond market is a well-understood source of corporate financing, but research on its cash and lending markets is limited. Using a dataset of corporate bond-lending transactions, we shed light on drivers of shorting activity and shorting costs.