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ClosetChartist
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Posts: 190
Joined: July 17th, 2003, 4:41 pm

LIBOR/Treasury Basis Risk

June 18th, 2007, 12:43 pm

Dear All,Does anyone have words of wisdom about the mismatch between these two markets, particularly if one is thinking of hedging LIBOR risk using Treasury instruments? Do the issues differ between the short and long ends of the curve?Can anyone share his favorite analytical technique for assessing/measuring basis risk?Regards,-CC-
 
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Martinghoul
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Joined: July 18th, 2006, 5:49 am

LIBOR/Treasury Basis Risk

July 20th, 2007, 7:34 pm

It's called swapspreads... I mean the TRSY/LIBOR spread. Mucho fundamental economics, etc. goes into the analysis, so I wouldn't hazard a guess as to where to begin... This stuff people trade very actively as core, irreducible risks in their portfolios. The tenor makes a difference, i.e. being long 2y swapspreads is very different to being long 30y swapspreads...