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The Eurodollar Futures and Options Handbook by Galen Burghardt

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APPENDIXComplete Operating Instructions for Calculating Term TED Spreads and Hedge Ratios

Calculating term TED spreads requires far greater attention to detail than one might think. Seemingly innocuous simplifying assumptions can affect the calculated value of the spread by 2 or 3 basis points, and when the spread is trading between 15 and 20 basis points, such errors can loom large. At the same time, because calculated values of the spread are so sensitive to both the assumptions and the data, traders should take care not to confuse precision with accuracy. Just because one can calculate a spread to a tenth of a basis point does not mean that one can trade it at that level of precision.

The purpose of this appendix is to spell out just how we ...

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