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

Investment manager James Franey confronts an obvious arbitrage opportunity during the worldwide financial catastrophe of 2008 when he notices an extensive yield spread between two U.S. Treasury bonds that mature on the same date. Franey must determine if there's an opportunity, how much of the capital of his fund to allocate, and how to structure a trade to use it.

Case exposition contains considerable 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 evaluation. All quoted costs in the instance are actual and historic, and corresponding Bloomberg orders are supplied for each as footnotes.

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

This is just an excerpt. This case is about FINANCE & ACCOUNTING

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