TITLE:
Analytical Approximation for Treasury Bill Default Spreads, Profits and Losses Equations
AUTHORS:
Rogelio Rodriguez-Oliveros, Javier Martin-Viscasillas, Jose M. Garcia-Romero
KEYWORDS:
Risk Modelling, Credit Risk, Default Spread, Theta Effect
JOURNAL NAME:
Journal of Financial Risk Management,
Vol.11 No.4,
December
29,
2022
ABSTRACT: In this work, we introduce expressions for the default spread
calculation based on an approximation of the
discount factor, for the specific case of Treasury Bills.
Additionally, expressions for the profit and losses array are obtained
supported by a pass-time yield correction. Some relevant limits are explored as
well in order to illustrate the large range model applicability. Treasury Bills
are especially relevant within the banking industry since the financial institutions usually hold the largest
portfolio position in them.