2
$\begingroup$

Let's assume I have various European stocks and would like to somehow estimate their long-term (5y+) forward prices.

As for repo rate for each individual stock, is it reasonable to assume that its long-end term structure can be proxied by Euro Stoxx 50's repo term structure (for example implied from long dated Total Return Swaps)?

$\endgroup$
  • 2
    $\begingroup$ Although it should not strictly be the case (repo rates are driven by liquidity and balance sheet considerations but also supply/demand all of which may significantly differ at the single name vs index level) it seems like a "good enough" starting guess IMO. It would be an interesting exercise to quantify how good (compare risk-neutral drift + divs across stocks/indices denominated in the same ccy). Note that there are now listed instruments with reasonable liquidity up to 10Y called 'Total Return Futures' on the Eurostoxx50 that may be used instead of OTC TRS quotes. $\endgroup$ – Quantuple Feb 13 '18 at 8:08

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Browse other questions tagged or ask your own question.