# Questions tagged [risk-free-rate]

The tag has no usage guidance.

18 questions
Filter by
Sorted by
Tagged with
1 vote
78 views

### How do we price a Non-USD currency FX Forward pair by using cross-currency basis for each currency?

For e.g., when pricing a GBPUSD FX-Forward we build the USD SOFR curve through which we get USD risk-free rate. For the GBP risk-free rate, we use the sum of GBPUSD Basis and SONIA. However, if we ...
• 11
112 views

### QuantLib: Getting the present value of a leg of cashflows using a 'risk-free' yield curve

I am trying to evaluate the present value of some cashflows and QuantLib does not return the discount factors that I am expecting. I have a Risk Free (Zero Coupon Bond) Yield curve: ...
1k views

### Conceptual problem with risk neutrality-What is a 'risk-neutral world', exactly?

I have persistent, deep problems with the concept of 'risk-neutrality'. To make it more precise, let's look at the following explanation taken from a book: "In a world where investors are risk ...
80 views

### 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) + \...
• 171
2k views

### 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 ...
• 5,998
1 vote
631 views

### 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 ...
• 11
1 vote
132 views

### 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 ...
254 views

### 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
90 views

### 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 ...
• 2,137
148 views

### 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 ...
• 2,081
2k views

### 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 ...
• 5,998
65 views

### 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 ...
346 views

### 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 ...
• 21
88 views

### 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 ...
405 views

### 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 ...
• 5,998
2k views

### Libor transition: Building SOFR discount curve

As I understand that after 2023 the Libor will be discontinued and OI rates like SOFR will ...
• 357
694 views

### 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 '...
• 23