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Academic Lecture:The TIPS-Treasury Bond Puzzle

TopicThe TIPS-Treasury Bond Puzzle

SpeakerMatthias Fleckenstein, Assistant Professor, University of Delaware

TimeJune 13, 2022 (Monday) 21:20-22:20

Virtual PlatformZoom ID:954 0044 7525 Password: 287918

OrganizersDelaware Institute of Data Science at SWUFE, Office of International Exchange and Cooperation, Research Office

Speaker’s Profile:

Matthias Fleckenstein is an Assistant Professor of Finance at the University of Delaware. His research interests include the role of arbitrage in financial markets, fixed income markets, term structure theory, derivative securities, and credit risk.His research has been published in top finance journals including the Journal of Finance, the Review of Financial Studies, and the Journal of Financial Economics. Several of his recent research papers have focused on frictions in financial markets that give rise to violations of the law of one price.

Lecture Preview

In this presentation, we will discuss a persistent violation of the law of one price that occurred in the multi-trillion-dollar U.S. Treasury bond market, one of the largest and most liquid financial markets in the world. We first cover the basics of the U.S. Treasury market. Then, we discuss how the prices of TIPS and Treasury notes/bonds are related via the law of one price. We analyze the nature of the violation of the law of one price that occurred in the U.S. Treasury bond and Treasury Inflation-Protected Securities (TIPS) markets and discuss how hedge funds took advantage of this "arbitrage" opportunity.



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