Municipal Bond Insurance: Trends and Prospects

24 Pages Posted: 20 Feb 2003

See all articles by Jonathan B. Justice

Jonathan B. Justice

University of Delaware, School of Public Policy & Administration

Stewart Simon

Financial Guaranty Insurance Company

Abstract

Privately sold bond insurance is the most common form of credit enhancement for municipal bonds. Research generally finds that bond insurance reduces interest costs for lower rated, long-term debt issues. Researchers have concluded that these results are consistent with presumed investor risk aversion, as well as more "rational" risk management behaviors, and with theories concerning the efficiency-enhancing properties of financial intermediation in imperfect markets. We propose a research agenda based both on traditional theories and on additional hypotheses that seek to account for the observed use of bond insurance where net savings would not normally be predicted.

Suggested Citation

Justice, Jonathan B. and Simon, Stewart, Municipal Bond Insurance: Trends and Prospects. Available at SSRN: https://ssrn.com/abstract=371438

Jonathan B. Justice (Contact Author)

University of Delaware, School of Public Policy & Administration ( email )

Newark, DE 19716
United States

Stewart Simon

Financial Guaranty Insurance Company ( email )

125 Park Avenue
New York, NY 10017
United States

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