Risk-Free Interest Rates

van Binsbergen, Jules H., Diamond, William F. and Grotteria, M (2021) Risk-Free Interest Rates. Journal of Financial Economics, 143 (1). pp. 1-29. ISSN 0304-405X

Abstract

We estimate risk-free interest rates unaffected by convenience yields on safe assets. We infer them from risky asset prices without relying on any specific model of risk. We obtain interest rates and implied convenience yields with maturities up to three years at a minutely frequency. Our estimated convenience yield on Treasuries equals about 40 basis points, is larger below three months maturity, and quadruples during the financial crisis. In high-frequency event studies, conventional and unconventional monetary stimulus reduces our rates more than the corresponding Treasury yields, thus broadly affecting rates even outside the narrow confines of the fixed-income market.

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Item Type: Article
Subject Areas: Finance
Additional Information:

© 2021 Elsevier.  This manuscript version is made available under the CC-BY-NC-NC licence https://creativecommons.org/licenses/by-nc-nd/4/0

Date Deposited: 15 Nov 2021 15:16
Date of first compliant deposit: 15 Nov 2021
Subjects: Financial risk
Interest rates
Last Modified: 06 Mar 2022 01:22
URI: https://lbsresearch.london.edu/id/eprint/1821
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