Questions tagged [risk-free-rate]

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CAPM estimation model alternatives [closed]

Let's take a look at the standard CAPM: $$ r_{i} -r_F = \alpha+\beta(r_{MKT}-r_F) + \varepsilon $$ I would like to consider the alternative formulation: $$ r_{i} = \alpha+\beta(r_{MKT}-r_F) + \...
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Term SOFR rate formula

The following website gives the specifications of the CME Term SOFR reference rates: CME Term SOFR. Point 1 in the link above specifies that the tenors that are currently supported are 1m, 3m, 6m, and ...
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Relationship between risk free rate and credit spread in the Merton model

Based on Merton model of credit risk, I understand that investing in a risky debt is the same as buying a treasury bond and writing a put option on the firm's assets with a strike price equal to the ...
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Are the monthly risk free returns on the French data libary website annualized?

when using the monthly Fama/French 3 Factors .csv file on the French data libary web site, it is possible to see that the left column includes the monthly excess return of the market (Mkt-RF) and the ...
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which market instruments are used to strip the SOFR curve under 1 year?

which instruments are used to strip the SOFR curve for the short term of the curve(below 1 y) ? there are no swaps with maturity under 1 year, right? thanks
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Risk Free Rates and Libor

With the demise of Libor, and the arrival of the new risk free rates (RFRs), what are the changes that are occurring with regards to : Valuation of existing derivatives Creation of new derivatives ...
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Which SOFR rate to use and when?

When looking at the actual daily values provided by the SOFR API it's a bit confusing when/where to use which values given they provide two sets of values with different dates, SOFR on a T-1 basis and ...
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Is there a difference between JPY TONA and JPY TONAR?

Wikipedia defines TONAR as "Tokyo Overnight Average Rate". The official Bank of Jappan website mentions TONA, rather than TONAR. I suspect the two, TONAR and TONA, are in fact two terms ...
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Portfolio optimisation

I want to create optimised portfolios in five different countries and calculate if the inclusion of cryptocurrencies or other alternative assets contribute to the diversification. I want to use ...
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PV and Risk on a RFR cross currency swap

When pricing a XCCY basis on RFR (assuming USD CSA so under SOFR), for example ESTER versus SOFR (USD leg resettable) : I observed that the PV / Risk and also FX Delta are close to zero. I have been ...
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How do I have to calculate the risk free rate of my two asset portfolio?

Good afternoon everyone! I have a question regarding the risk free rate of my two asset portfolio. For my course, we have to create a two asset portfolio with the time frame of 2015-2020 with monthly ...
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Current liquidity of USD OIS-SOFR Swaps

We have now moved to discounting using OIS-SOFR swaps on cleared products and SOFR products in general have picked up in liquidity since last time this question was asked. I'd therefore like to ...
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Libor transition: Building SOFR discount curve

As I understand that after 2023 the Libor will be discontinued and OI rates like SOFR will ...
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2 answers
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Risk-free interest rate for option pricing from treasury yield curve rates

I am experimenting with an implementation of the Black-Scholes valuation for call options, and ran into the following questions: Black-Scholes pricing requires a risk-free interest rate. What is '...
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The exact mechanics of USD OIS Swaps: SOFR, EFFR & Libor cessation

EDIT 2020-11-17: thank you to @user42108 for the link to OpenGamma conventions PDF in his answer below. The PDF is comprehensive and explains the mechanics of USD OIS Swaps based on Effective Federal ...
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