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Liquidity, Reconstitution, and the Value of U.S. Treasury Strips
Author(s) -
DAVES PHILLIP R.,
EHRHARDT MICHAEL C.
Publication year - 1993
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.1993.tb04712.x
Subject(s) - coupon , treasury , market liquidity , strips , monetary economics , payment , value (mathematics) , principal (computer security) , economics , business , finance , mathematics , geography , computer science , statistics , archaeology , algorithm , operating system
An apparent pricing anomaly exists in the market for U.S. Treasury strips: zero‐coupon strips created from principal payments typically trade at significantly higher prices than otherwise identical zero‐coupon strips created from coupon payments. In addition to documenting this phenomenon, this study demonstrates that differences in liquidity and differences in reconstitution characteristics explain much of this price variation.