Fixed Income Arbitrage in a Financial Crisis (B): US Treasuries in December 2008

Posted: 1 Mar 2012

See all articles by Ryan Taliaferro

Ryan Taliaferro

Acadian Asset Management

Stephen Blyth

Harvard Management Company

Date Written: June 22, 2011


The B case briefly recounts the action that investment manager James Franey takes in the matter of two U.S. Treasury bonds with identical maturity dates but widely different yields. He must decide what to do next.

Learning Objective: This case may be used: to review bond valuation and associated measures of bonds' 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 short-selling, margin lending, and 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 (B): US Treasuries in December 2008 (June 22, 2011). Harvard Business School Finance Case No. 211-050, 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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