Finance, Accounting and Control Case Study

US Junk Bond Bubble: Is History a Better Guide for the Present?

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Abstract:
'Junk bond' is one of the finest innovations in financial products that benefit both the issuers and the investors. However, as greed and over-exuberance get a better hold, junk bonds do become junk.

Pedagogical Objectives:

• To discuss the relative merits and demerits of junk bonds
• To discuss the traditional portfolio theory and modern portfolio theory
• To discuss the fact that when decision-making is shrouded by greed and unsound advice, history could be a better guide.

Keywords : Investment grade junk bonds, Alexander Hamilton, Michael Milken and Harry Markowitz, Credit quality, Interest rate, Debt restructuring, Leveraged buyout, Great depression, Liquid instruments, Cash flow of mutual funds, Speculative grade issuance of bonds, Booms and busts, Finance Case Study, Greater fool theory, Risk return trade off, Long term capital management