Posts tagged 'risk free rate'

Goldman Sachs on fewer ‘safe assets’

First of all, a big congratulations to Goldman Sachs for jumping on board the safe assets debate approximately 12 months late.

And, in so doing, challenging (but not really challenging) what we still think is the biggest trend of the post-crisis era. Read more

S&P plays Grim Reaper for the upcoming death of AAA

A major FT exclusive on Monday:

Standard and Poor’s has warned Germany and the five other triple A members of the eurozone that they risk having their top-notch ratings downgraded as a result of deepening economic and political turmoil in the single currency bloc. Read more

Treasuries are the new gold

We’ve talked a lot about how US Treasuries have arguably become a *type* of Giffen, Veblen, choke-price resistant good/asset (pick one) since about mid-August this year.

A date which happens to coincide with the return of over-riding deflation fears, as well as a pause in gold’s stellar price rise, and a major pick-up in demand for Treasuries: Read more

In a brave new world, there are no benchmarks

UK retailer John Lewis proudly boasts that it has never been knowingly undersold in the market. Its retail prices, consequently, can be used by consumers as a benchmark to compare all other retail prices against (yes, we know, the mantra doesn’t apply to their website prices, but you see our point.)

So, applying the same philosophy to financial markets, you could say, the US is the global markets’ version of John Lewis. Its securities provide the prices against which all other securities in the world are priced. Read more

Unravelling the mystery of the negative US swap rate

Readers might remember how back in March 2008, Bloomberg ran a story that declared:

Treasuries Riskier Than Bunds, Default Swaps Show (Update1) Read more

What happens when the risk-free rate isn’t risk free?

“Corporate finance is built on the idea that companies are more likely to go bust than governments.” Discuss.

According to the thinkers at the Economist, it is time to rethink the notion that the risk-free rate can always be used as a basis for pricing other assets: Read more