Fixed Income Arbitrage in a Financial Crisis (D): TED Spread and Swap Spread in May 2009

Posted: 1 Mar 2012

See all articles by Ryan Taliaferro

Ryan Taliaferro

Acadian Asset Management

Stephen Blyth

Harvard Management Company

Date Written: January 18, 2011


The D case briefly recounts the action that investment manager Albert Mills takes in the matter of an unusually low U.S. dollar fixed-floating swap spread. He must decide what to do next.

Learning Objective: This case may be used: to introduce fixed-floating interest rate swaps; to review or introduce important interest rates and spreads, such as LIBOR, TED spread, and swap spread; to review or introduce valuation of fixed-income securities and derivatives and associated measures of price-sensitivities to interest rates; to review the Law of One Price (LOOP) and resulting opportunities when LOOP fails; to describe the mechanics of exploiting violations of LOOP; and to describe hedge fund financing arrangements, particularly repurchase (repo) agreements. The case also may be used: to discuss the causes of anomalous securities prices during the 2008 crisis; to explore causes and consequences of the 2008 crisis generally; and to discuss possible interventions by government, central banks, and other oversight bodies.

Suggested Citation

Taliaferro, Ryan and Blyth, Stephen, Fixed Income Arbitrage in a Financial Crisis (D): TED Spread and Swap Spread in May 2009 (January 18, 2011). Harvard Business School Finance Case No. 211-052, Available at SSRN:

Ryan Taliaferro (Contact Author)

Acadian Asset Management ( email )

260 Franklin Street
Boston, MA 02110
United States

Stephen Blyth

Harvard Management Company ( email )

600 Atlantic Avenue
Boston, MA 02210
United States

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