New answers tagged

2

CRSP will give you returns with dividends and without dividends from SPX which allow you to compute those. If you do not have access you can use the data from this paper: "On the Importance of Measuring Payout Yield: Implications for Empirical Asset Pricing," Boudoukh, Michaely, Richardson, Journal of Finance, 2007. The data is freely available here: http://...


2

There is no real "risk-free" rate. Now to answer your question, $r$ is time-dependent and should correspond to the repo rate corresponding to the maturity of your forward. In $I$, dividends should be "discounted" using the same time-dependent repo rate. Contrary to what others have suggested here, the use of an OIS rate or some other rate is not ...


0

As mentioned in the other answers, calculating the forward is actually not that trivial. Here is a link to a nice note on equity financing costs / repo: https://www.globalvolatilitysummit.com/wp-content/uploads/2015/10/A-New-Normal-in-Equity-Repo-BNP-Paribas.pdf How all this affects option pricing you might want to read Piterbarg's Risk paper "Funding ...


1

The discount rate is NOT "risk-free", except in textbooks. If a few brokers provide the majority of liquidity to the futures market, it's their funding cost that will be effective cost of capital for the futures, and associated options. Which will be inter-bank (Eurodollars, EURIBOR rather than OIS, EONIA etc). It is merely academically convenient to ...


1

What is the risk free rate? In current practice the market repo rate is used. Each market firm faces a slightly different cost of funding and their internal rates will vary from one-another. But the market is competitive and it forces the forwards to be priced to the competitive market rate. Forwards themselves don't really trade a lot. Most ...


1

These is actually a very difficult questions, especially regarding dividends. 1. What is the risk free rate? Theoretically OIS (with in Europe EONIA as the overnight rate) is the best estimate of risk free. However, other rates are used in practice, in the past is was quite common to look at government bond yields (e.g. Germany, USA). In equity world it is ...


Top 50 recent answers are included