Take the 2-minute tour ×
Quantitative Finance Stack Exchange is a question and answer site for finance professionals and academics. It's 100% free, no registration required.

I have a question in determining the risk-free rate of Ecuador. For developed countries like United States and Great Britain, the risk-free rate can be obtained in financial database such as Reuter or Bloomberg by directly obtaining the government bond/bills yields or swap rate curve.

However, for developing countries such as Ecuador, I cannot obtain the risk-free rate based on Reuter or Bloomberg. As a result, how is its risk-free rate determined?

share|improve this question
    
The risk free rate is determined by demand & supply, which, combined with no arbitrage, leads to the Fisher parity –  Julian Lopez Baasch Dec 19 '13 at 17:39
    
However, for Ecuador, the currency used is United States, then I simply adopt US treasury bonds/bill yields as risk-free rate? But I feel strange about using US treasury bonds/bill yields as risk-free rate. If the US rate can be used as proxy of Ecuador risk-free rate, what is the rationale? –  Dennis Dec 19 '13 at 17:51
    
I mean, there can not be TWO different risk free rates in the same world... –  Julian Lopez Baasch Dec 19 '13 at 17:56
    
If there cannot be two different risk free rates, then how the risk-free rate of Ecuador is determined? Since the currency of Ecuador is US Dollar, then I can only use US related currency to determine the risk-free rate, which is the same as determining the US risk-free rate. Then it makes me think that US risk-free rate is the risk-free of Ecuador. But it seems strange and I want to know how is the risk-free rate of Ecuador is determined exactly. Thanks. –  Dennis Dec 19 '13 at 18:02
add comment

Your Answer

 
discard

By posting your answer, you agree to the privacy policy and terms of service.

Browse other questions tagged or ask your own question.