In Search of Safe Havens: The Trust Deficit and Risk-free Investments!
Musings on Markets
AUGUST 15, 2023
As the risk-free rate rises, expected returns on equities will be pushed up, and holding all else constant, stock prices will go down., and the reverse will occur, when risk-free rates drop. That is why the risk-free rate becomes an input into option pricing and forward pricing models , and its absence leaves a vacuum.
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