The green bond market is emerging as an impactful financing mechanism in climate change mitigation efforts. The effectiveness of the financial market for this transition to a low-carbon economy depends on attracting investors and removing financial market roadblocks. This paper investigates the...

The main focus of the study is to determine the financial uncertainty while examining the Sukuk bonds prices, Sukuk bond and global emerging market indices returns dynamics. The study, with a time period ranging from 2017 to 2020, applies the quantile regression technique. The study findings...

We document capital misallocation in the U.S. investment-grade (IG) corporate bond market, driven by quantitative easing (QE). Prospective fallen angels - risky firms just above the IG rating cutoff-enjoyed subsidized bond financing since 2009, especially when the scale of QE purchases peaked...

This paper analyzes a new stylized fact: The correlation between uncertainty shocks and changes in inflation expectations has declined and turned negative over the past quarter century. It rationalizes this fact within a standard New Keynesian model with a lower bound on interest rates combined...

This article introduces a new approach for dealing with the diversification/concentration risk of fixed income assets. Because Government bonds, corporate bonds, and mortgage backed securities constitute a large proportion of the assets of institutional investors in most countries, it is...

This paper discusses the current developments and adoption of financial instruments designed to support the efforts of governments and corporations in decarbonizing their activities. Particular focus is given to the role of Green Bonds, a debt-like financial instrument whose proceeds are used to...

This study sets out a new methodology to exemplify, through a set of risk metrics called the Greeks, impact of a bond’s structured provisions (e.g., call, put, and conversion options) on its risk characteristics and its propensity for agency conflicts. The methodology is assessed by applying...

Investor concerns about climate and other environmental regulatory risks suggest that these risks should affect corporate bond risk assessment and pricing. We test this hypothesis and find that firms with poor environmental profiles or high carbon footprints tend to have lower credit ratings and...

Recent findings on the term structure of equity and bond yields pose serious challenges to existing models of equilibrium asset pricing. This paper presents a new equilibrium model of subjective expectations to explain the joint historical dynamics of equity and bond yields (and their yield...

Faced with a persistent pandemic, investors are concerned about portfolio diversification. While the literature on COVID-19 has evolved impressively, limited work remains on diversification opportunities. We contribute to the literature by exploring the volatility and co-movement of different...

The rise of bond financing in EuropeUsing large panel data of public and private firms, this paper dissects the growth of bond financing in the Euro Area through the lens of the cross-section of issuers. In recent years, the composition of bond issuers has shifted, with the entry of many smaller...

Thematic bonds are fixed-income securities that highlight the issuer's environmental and social objectives, commit funds to relevant activities, and are labeled as such. They are subject to the same capital market and financial regulations as other listed fixed-income securities. Most are backed...

Using a 2009-2019 sample of Chinese bond issuers, we examine the effect of carbon risk on bond financing costs. Relative to low carbon risk issuers, high carbon risk issuers have substantially larger bond credit spreads, mainly because their credit risk is greater and they invest the funds in...

Als Reaktion auf die Corona-Krise haben die Notenbanken des Eurosystems ihre Anleihekäufe im Rahmen des APP-Programms weiter aufgestockt und um das PEPP-Programm erweitert. Diese im Zusammenspiel mit weiteren Maßnahmen der "außergewöhnlichen Geldpolitik" geschaffene zusätzliche Liquidität...

We show that GDP-linked bonds can provide diversification benefits to investors. We use a stochastic spanning methodology which makes no assumptions on the distri- butional characteristics of the returns of these novel instruments and test both floaters and linkers. None of these types of...

We derive a simple expression for the sensitivity of duration, convexity, and higher-order bond risk measures to changes in term structure shape parameters. Our analysis enables fixed income portfolio managers to capture the combined effects of term structure level, slope, and curvature shifts...

In this paper, I test the prediction that green bonds sell for lower yields than equivalent non-green bonds. The relative performance of such green assets is of fundamental importance to the growing ESG investment industry, but current empirical literature disagrees regarding the existence of a...

We examine the business model of traditional commercial banks in the context of their co-existence with shadow banks. While both types of intermediaries create safe "money-like" claims, they go about this in different ways. Traditional banks create safe claims by relying on deposit insurance,...

We challenge the narrative that climate change transition risk is not being priced into sovereign bond markets. Climate change transition risk, as measured by carbon dioxide emissions, natural resources rents and renewable energy consumption, are factored into sovereign bond yields (and spreads)...

A system is implemented that simulates a bond portfolio over the long-term of liabilities. It pays all liabilities and extracts continuously a fixed percentage of remaining liabilities to stakeholders while maintaining a strategic asset allocation. This fixed percentage is proposed as return...

US stock-bond correlation, which plays an important role in institutional portfolio construction, has been persistently negative for the last 20y. This negative correlation allows stocks and bonds to serve as a hedge for each other, enabling CIOs to increase stock allocations while still...

This paper aims at providing an assessment of green bonds from the perspective of sovereign issuers. After a brief depiction of green bonds’ features, we describe the market evolution, present the EU regulatory framework and identify the main benefits and costs for sovereign issuers. We focus...

This paper revisits how coexistence of money and bonds can make a society better off. For this purpose, a model is constructed in which payment instruments matter for settling real transactions and savings instruments matter because agents differ in how they discount future utility. Because...

We use a sample of 27 countries and 63 currency news announcements in an event study framework to examine the impact of currency news on international government bond markets. Our findings reveal a significant spillover of currency news into bond markets. Specifically, the evidence shows...

We propose a conditional factor model for corporate bond returns with five factors and time-varying factor loadings. We have three main empirical findings. First, our factor model excels in describing the risks and returns of corporate bonds, improving over previously proposed models in the...

This paper documents a positive cross-sectional relation between returns and lagged idiosyncratic volatility (IVOL) in the corporate bond market. The relation is stronger following periods of low funding liquidity due to a funding liquidity driven decrease in returns and its subsequent reversal....

The idea to propose the COVID-19 Emergency Bonds (C-19E-Bonds) is to find a new financial source and resources to support the COVID-19 crisis with local funds to the government. This type of bond avoids more external debts and generates a national macroeconomic financial stability and...

This paper proposes and provides evidence on a green bonding hypothesis, where green bonds act as a commitment device that subjects firms to institutions holding them accountable to their environmental promises. I find that green-bond issuers face higher climate change risks and opportunities...

We find that green bonds exhibit higher capacity to borrow foreign capital in local currency than regular bonds issued by the same firm, which reduces currency mismatch risk in corporates' balance sheets while increasing that in investors'. We further show that this is driven by climate policy,...

In recorded financial history, there are almost no occasions, other than the present, where a significant portion of the global bond markets has been trading at negative nominal yields. Is this an anomaly or what will be the normal state of the financial markets in years to come?This monograph...

The SBBI® Summary Edition will help investment professionals gain an understanding of major asset class returns, return calculations, and the long term impact of size, value/growth, and liquidity on returns

This paper estimates and tests an international version of the Capital Asset Pricing Model. Investors from the U.S., Germany and Japan choose a portfolio that includes bonds and equities from each of these countries to maximize a function of the mean and variance of returns. Investors in each...

Using comprehensive data on U.S. corporate bond trades since 2002, we find that retail bond investors over-rely on untimely credit ratings, neglect firm fundamentals, and appear to misunderstand the trade-off between bond risk and yields. Specifically, retail investors appear to select bonds by...