Risk-Free Interest Rates

Jules van Binsbergen, William Diamond and Marco Grotteria

No 26138, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: E41 E43 E44 E52 E58 G12 G15 (search for similar items in EconPapers)
Date: 2019-08
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Note: AP ME
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Citations: View citations in EconPapers (12)

Published as Jules H. van Binsbergen & William F. Diamond & Marco Grotteria, 2021. "Risk-free interest rates," Journal of Financial Economics, .

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Journal Article: Risk-free interest rates (2022)
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