TY - JOUR T1 - The Tax Option in Municipal Bonds JF - The Journal of Portfolio Management SP - 94 LP - 102 DO - 10.3905/jpm.2014.40.2.094 VL - 40 IS - 2 AU - Andrew Kalotay AU - C. Douglas Howard Y1 - 2014/01/31 UR - https://pm-research.com/content/40/2/94.abstract N2 - Tax-loss harvesting is an idea that has been around for decades. This article tries to quantify the value of this tax option embedded in municipal bonds. The authors first develop an algorithm that optimizes the timing of taking tax losses. Using this algorithm, they determine the expected tax benefit that can be extracted over a bond’s lifetime. Under realistic assumptions, the value of the tax option embedded in a long-term bond amounts to several points.TOPICS: Legal and regulatory issues for structured finance, volatility measures ER -