mar350

Mobius:

To his point:

>>> dude, I said uncomplicated!

So that's what I threw out there. I agree all those theories have holes in them and have been discussed more in the equity domain. The other comment on interest rate calls and mean reversion is also interesting. Can you explain that more? The math on that? Frankly I don't do much fixed income work so I'm just curious.

It is indeed a true cost of illiquidity, not marketability, since there are no restrictions. Still, the 25 bps just doesn't pass the gut check for me if you're really trying to figure out the fair market value of the note. Could you really find a buyer for a transaction cost of 25 bps? That sounds really low to me.....