In the end, a theory is accepted not because it is confirmed by conventional empirical tests, but because researchers persuade one another that the theory is correct and relevant.

Thus a long term corporate bond could actually be sold to three separate persons. One would supply the money for the bond one would bear the interest rate risk, and one would bear the risk of default. The last two would not have to put up any capital for the bond, though they might have to post some sort of collateral.

Markets look a lot less efficient from the banks of the Hudsonthan the banks of the Charles.