Fixed Income Arbitrage in a Financial Crisis (A): US Treasuries in November 2008 Case Solution

This Case is about  FINANCIAL MARKETS, RISK MANAGEMENT

PUBLICATION DATE: January 18, 2011 PRODUCT #: 211049-HCB-ENG

Investment manager James Franey faces an obvious arbitrage chance during the worldwide monetary catastrophe of 2008 when he sees an extensive yield spread between two U.S. Treasury bonds that mature on the same date.

Franey must determine whether there’s an opportunity, how much of his fund’s capital to allocate, and how to structure a trade to use it. Instance exposition contains significant detail on funding arrangements, especially short selling, margin lending, and repurchase agreements, that support relative-value strategies.

Careful attention is paid to the bond mathematics computations that support selection and the protagonist’s investigation. All quoted costs in the instance are historic and actual, and similar Bloomberg orders are supplied for each as footnotes.

Fixed Income Arbitrage in a Financial Crisis (A): US Treasuries in November 2008 Case Solution
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