Bond Insurance : What is Special About Munis ?  

Oleh:

Nanda, Vikram ; Singh, Rajdeep

Jenis: Article from Journal - ilmiah internasional
Dalam koleksi: The Journal of Finance (EBSCO) vol. 59 no. 5 (Okt. 2004), halaman 2253-2280.
Topik: INSURANCE; studies; municipal bonds; insurance; tax exempt securities; maturity; third party
Fulltext: p 2253.pdf (204,88KB)

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Perpustakaan Pusat (Semanggi) Nomor Panggil: JJ88 Non-tandon: 1 (dapat dipinjam: 0) Tandon: tidak ada

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Isi artikel

Close to 50% of municipal bonds are prepackaged with insurance at the time of issue. We offer a tax - based rationale for the emergence of third - party insurance of tax - exempt bonds. We argue that insurance adds value as it allows a third party to become, in a probabilistic sense, an issuer of tax - exempt securities. Insurance however reduces value by eliminating the possibility of a capital tax loss. While the net benefit from insurance increases with bond maturity, the benefit may not increase monotonically with default risk. We also provide empirical evidence supportive of the model's predictions.

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