Glossary

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T-Bill

T-Bills or treasury bills are contracts of ZCB-type issued by the central banks in their domestic currency. For longer maturities the central banks issue treasury bonds. These contracts are usually considered to have almost no counterparty risk. This is not really true considering Argentina in the 80's and Russia's cancelling of payments to foreign investors for Soviet issued bonds in the late 90's, which was one of the reasons for the crash of the LTCM-fund (with both M. Scholes and R.C Merton in the board of directors). In the aftermath of the financial crises in 2008-2009 we also see Latvia casting some serious doubt about zero risk and even more so Greece from 2010 and onward. The US debt crises is of course also a related issue.

From a mathematical point of view a treasury bill is just a zero coupon bond.

 

Questions: Magnus Wiktorsson
Last update: 2011 Sep 07 15:20:23. Validate: HTML CSS

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