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The Eurodollar Futures and Options Handbook by Galen Burghardt

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CHAPTER 11Measuring and Trading Term TED Spreads

Galen Burghardt, William Hoskins, and Susan KirshnerResearch note originally released July 26, 1995

SYNOPSIS

The spread between Treasury and Eurodollar rates, which we know as the TED spread, has been a staple trade in the futures markets ever since the Eurodollar contract was listed in 1981. As a measure of the credit spread between high-grade bank debt and Treasury debt, the TED spread often has responded sharply to financial crises that have threatened to harm the credit quality of the banking system.

Although the world has become less skittish over the years and tends to react less violently to financial crises than it once did, the basic TED spread is still an active part of the trading scene. ...

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