The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd


  • Donald D. Hester
Reference work entry


A bond is commonly understood to be a debt instrument in which a borrower receives an advance of funds and contracts to make future payments of interest and principal according to an explicit schedule. The nominal return from holding a bond is the sum of its interest payments and the change in its price over an arbitrary holding period. Bonds differ in terms of face value, maturity, callability, seniority, convertibility, risk of default, and size, frequency and taxability of interest payments. Since 1970 bond markets have experienced a number of major institutional changes with enduring consequences for capital markets.


Asset-backed debt Bankruptcy Bonds Capital gains and losses Central banks Default Defeasance Derivative securities Discount bonds Eurobonds Interest rates Junk bonds Medium term notes Miller, M. Modigliani, F. Options Sovereign debt Stripped bonds Tobin, J. 

JEL Classifications

This is a preview of subscription content, log in to check access.


  1. Becketti, S. 1988. The role of stripped securities in portfolio management. Federal Reserve Bank of Kansas City Economic Review 73: 20–31.Google Scholar
  2. Black, F., and M. Scholes. 1973. The pricing of options and corporate liabilities. Journal of Political Economy 81: 637–654.CrossRefGoogle Scholar
  3. Bulow, J., and K. Rogoff. 1988. The buyback boondoggle. Brookings Papers on Economic Activity 2: 675–704.CrossRefGoogle Scholar
  4. Bulow, J., and J. Shoven. 1978. The bankruptcy decision. Bell Journal of Economics 9: 437–456.CrossRefGoogle Scholar
  5. Cox, J., J. Ingersoll Jr., and S. Ross. 1981. The relation between forward prices and futures prices. Journal of Financial Economics 9: 321–346.CrossRefGoogle Scholar
  6. Crabbe, L. 1993. Anatomy of the medium-term note market. Federal Reserve Bulletin 79: 751–768.Google Scholar
  7. Modigliani, F., and M. Miller. 1963. Corporate income taxes and the cost of capital: A correction. American Economic Review 53: 433–443.Google Scholar
  8. Robinson, J. 1951. The rate of interest. Econometrica 19: 92–111.CrossRefGoogle Scholar
  9. Smith, W. 1970. The role of government-sponsored intermediaries. In Housing and monetary policy, Conference series no. 4, 86–101. Boston: Federal Reserve Bank of Boston.Google Scholar
  10. Stoll, H. 1969. The relationship between put and call option prices. Journal of Finance 24: 801–824.CrossRefGoogle Scholar
  11. Tobin, J. 1963. An essay on the principles of debt management. In Fiscal and debt management policies, Prepared for the Commission on Money and Credit, 143–218. Englewood Cliffs: Prentice-Hall.Google Scholar
  12. Wrase, J. 1997. Inflation-indexed bonds: How do they work? Federal Reserve Bank of Philadelphia Business Review 3–16.Google Scholar
  13. Zhang, P. 1997. Exotic options: A guide to second generation options. Singapore: World Scientific Publishing.CrossRefGoogle Scholar

Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Donald D. Hester
    • 1
  1. 1.