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risk-free rate

  1. Nicole Seaman

    P2.T10.20.7. Beyond LIBOR

    Learning objectives: Describe the features comprising an ideal benchmark. Examine the issues that led to the replacement of LIBOR as the reference rate. Examine the risks inherent in basing risk-free rates (RFR’s) on transactions in the repo market Questions: 20.7.1. According to the Bank for...
  2. Nicole Seaman

    P2.T5.507. Credit and debit value (CVA and DVA) adjustments and the risk-free rate

    Learning outcomes: Explain why the OIS rate is a good proxy for the risk-free rate. Describe how to construct the OIS zero curve, and using it, determine forward LIBOR rates. Questions: 507.1. A company with an average funding cost of 4.0% is currently undertaking projects worth $80.0 million...
  3. Nicole Seaman

    P2.T5.506. Risk-free rate versus LIBOR and the overnight indexed swap (OIS) rate

    Learning outcomes: Explain the main considerations in choosing a risk-free rate for derivatives valuation. Describe the OIS rate and the LIBOR-OIS spread, and explain their uses. Questions: 506.1. With respect to the risk-free rate, LIBOR, and the overnight indexed swap (OIS) rate, consider...