Article | Journal of Finance | June, 1989

New Hope for the Expectations Hypothesis of the Term Structure of Interest Rates

Keywords: rational expectations; Yield curve; Interest Rates; Asset Pricing; Behavioral Finance;

Format: Print

23 pages

Citation:

Froot, K. A. "New Hope for the Expectations Hypothesis of the Term Structure of Interest Rates." Journal of Finance 44, no. 2 (June, 1989): 283–305. (Revised from NBER Working Paper No. 2363, March 1990. Reprinted in Behavioral Finance, edited by H. Shefrin, part of the International Library of Critical Writings in Financial Economics, edited by R. Roll. London: Edward Elgar, 2000.)

UAL is a large air transportation company with roots that go back to the 1920s. As a legacy carrier, going back to before the 1978 deregulation of air transportation markets, United Airlines is burdened with cost structures that make it difficult to compete with newer competitors. In addition, UAL has the burden of $7.6 billion in unfunded pension obligations and $2 billion in unfunded retiree health obligations. In June 2004, UAL is still operating under Chapter 11 bankruptcy protection, which began December 2002. It has needed extensions of the exclusivity period from the bankruptcy court. UAL's plan of reorganization is predicated on receiving $1.8 billion in loan guarantees from the Air Transport Stabilization Board (ATSB). But its request for loan guarantees from the ATSB was recently rejected. The company must decide what to do next and how to emerge from bankruptcy.

Kishore Karunakaran, President and COO of FFCM, faces a variety of challenges in launching an innovative investment management business in the rapidly evolving ETF space.

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