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Risk-free interest rates

Subject

Finance

Publishing details

NBER Working Paper

Authors / Editors

van Binsbergen J H;Diamond W;Grotteria M

Biographies

Publication Year

2018

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 a term structure of convenience yields with maturities up to 2.5 years at a minutely frequency. The convenience yield on treasuries equals about 40 basis points, is larger below 3 months maturity, and quadruples during the financial crisis. In high-frequency event studies, conventional and unconventional monetary stimulus reduce convenience yields, particularly during the crisis. We further study convenience-yield-free CIP deviations, and we show significant bond return predictability related to convenience yields

Publication Notes

Demand for safe assets; Convenience yield; Quantitative easing; Monetary policy

Series Number

26138.

Series

NBER Working Paper

Available on ECCH

No


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