18
Sep
10

Paper: Arbitrando TIPS y Treasury

WHY DOES THE TREASURY ISSUE TIPS? THE TIPS–TREASURY BOND PUZZLE

Abstract

We show that the price of a Treasury bond and an inflation-swapped TIPS issue exactly replicating the cash flows of the Treasury bond can differ by more than $20 per $100 notional. Treasury bonds are almost always overvalued relative to TIPS. Total TIPS–Treasury mispricing has exceeded $56 billion, representing nearly eight percent of the total amount of TIPS outstanding. TIPS–Treasury mispricing is strongly related to supply factors such as Treasury debt issuance and the availability of collateral in the financial markets, and is correlated with other types of fixed-income arbitrages, These results pose a major puzzle to classical asset pricing theory. In addition, they raise the issue of why the Treasury issues TIPS, since in so doing it both gives up a valuable fiscal hedging option and leaves large amounts of money on the table.

Link al Paper

________________________________________

FT Alphaville tiene más información sobre dicho trade.

Advertisements

0 Responses to “Paper: Arbitrando TIPS y Treasury”



  1. Leave a Comment

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s


Fun & Finance

Vimeo

Fun & Finance Rollover

Contacto

informes@qfclub.com.ar
"It is hard to be finite upon an infinite subject, and all subjects are infinite." Herman Melville

Powered by

September 2010
M T W T F S S
« Aug   Oct »
 12345
6789101112
13141516171819
20212223242526
27282930  

Categorias

Archivo

Ingrese su dirección de email para suscribirse a este blog y recibir las notificaciones de nuevos posts via email

Join 35 other followers

Web Analytics Clicky

%d bloggers like this: