Analytical Approximation for Treasury Bill Default Spreads, Profits and Losses Equations

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.