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Assessing Global Risk-Free Rates: Into the Abyss of Financial Markets

Explore the concept of risk-free rates in different currencies like USD, GBP, JPY, CHF, and EUR as of February 13, 2012. Understand how government bond rates and CDS market data help estimate these rates. Look for insights on sovereign default spreads to make informed decisions.

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Assessing Global Risk-Free Rates: Into the Abyss of Financial Markets

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  1. Into the Abyss: What if nothing is risk free? Risk free Rates: Looking at the numbers February 13, 2012

  2. Easy does it.. • What is the risk free rate in • US $ • British Pounds • Japanese Yen • Swiss Francs • Euros

  3. Climbing the ladder… These are 10-year government bond rates in the local currencies. Estimate the risk free rates in each currency (and you can use any of the information on the next 3 pages).

  4. 1. Government bonds in $/Euro India, China, Korea and South Africa issue only local currency bonds

  5. 2. The CDS Market Here is how you read this. To insure yourself against default risk in Abu Dhabi, you will have to pay 1.02% a year. India NA Korea 1.10% South Africa 1.53%

  6. 3. Sovereign Default Spread Lookup Table

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