An Experimental Study of Bond Market Pricing

Arbeitspapier

An important feature of bond markets is the relationship between initial public offering prices and the probability of the issuer defaulting. First, this probability affects the bond prices. Second, IPO prices determine the default probability. Though market equilibrium has been shown to predict well for other assets, it is a priori unclear whether markets will yield competitive prices when such interaction with the default probability occurs. We develop a flexible bond market model that is easily implemented in the laboratory and examine how subjects price bonds. We find that subjects learn to price bonds well after only a few repetitions.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Tinbergen Institute Discussion Paper ; No. 16-059/I

Classification and Topics

• Classification: Wirtschaft ; Design of Experiments: Laboratory, Group Behavior ; Design of Experiments: General ; Market Design ; Asset Pricing; Trading Volume; Bond Interest Rates
• Subject: bond markets ; experimental finance ; experimental markets ; asset pricing ; learning

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Weber, Matthias ; Duffy, John ; Schram, Arthur
• Event: Veröffentlichung
• (who): Tinbergen Institute
• (where): Amsterdam and Rotterdam
• (when): 2016

Further information

• Handle: http://hdl.handle.net/10419/145366
• Last update: 10.03.2025, 11:45 AM CET