Years of Poems and Spirits

Just come across the concept of TED Spread: the spread b/w noncollateralized short term (3-month) loan and the rate of 3m T-Bill.

Related concepts: Eurodollar (see class notes from Fin576/Debra Glassman), LIBOR (see site FAQ), interbank loan wholesale market, LIBOR-OSI spread (collateralized loan rate)

Significance:

• Measurement of credit risk, particularly banking and financial system.
• Recent spike (see chart above).
• May be used against GDP per capita change and/or market charts to validate low correlation (see also delta in SP500).
• Further proof of no direct connection of financial market health with boarder economy: counter argument of Greenspan Put’s rationale

Other resources: Paul Krugman’s articles, Matt Ferris’s blog entry (Amazing kid. Where was I when I got out of college? Totally put me to shame, sigh …)