Sir, in the graph depicting risk free rates by currency, I think the red portion shows the risk free rate ( as also mentioned in the graph) but then you explained it otherwise. (49:47). Can you please clarify once?
Hello, in 1st problem can we subtract the credit default spread from the Risk free rate based on the credit rating of the country? since now that they all ll be AAA rated rates, we can take take weighted average.
When using approach 2 to figure out the CDS spread for a country why would you subtract the CDS of the US? Shouldn't we subtract by a value lower than 0.18% otherwise we are implicitly assuming that the US bond rate is risk free?
Hi, Professor When you are explaining risk-free rate for Europe cant we take an average of all countries, risk-free rate considering each Europe as states of Europe union, just like for the US
Hi Professor, We have seen the Risk Free Rate = Real Interest rate + Expected inflation rate. Over the years, is the change in risk-free rate only due to changes in the expected inflation rate or the real interest rate also changes?
Dear sir, Please could you make an explicit video or explain how sovereign default is preferred way than overprinting money and hyper-inflation? Because as we can see in many sovereign default cases like Greece, Lebanon, Germany(in post world war phase) some other country had to pull out them of the deep and then they have a great power over these defaulted countries. Isn't it much harmful to the country overall? So how "Sovereign Default preferred over Debasement" ? Thank you!
mr Aswath. i am a beginning student of economics/finance, do you have any recommendations for good podcasts/youtube channels (besides this one of coarse) that i could use to further my understanding of markets/current events?
@@Михаил-д6х1з thank you (although i'm skeptical of bloombreg since they have been pushing an agenda to the deficit of the facts in their political reporting, is the financial section better?)
@@Михаил-д6х1з as to the recommendations. thank you i will read them. as the the agenda. things like publishing "child gun deaths" while including 19 and 20 year olds and framing it as if these are accidental in home deaths but including gang members in that number, whatever side of the debate you are on i think its misleading to use gang members killing gang members (which is where the vast majority of these deaths came from) to claim that there is an epidemic of children dying in their home from unsecured firearms and the like, and in case you think it was an honest mistake 19 and 20 year old's don't legally count as children and the claim was an in house study not just a citation
Hi Professor. First off, thank you for making your knowledge and teachings available to the public. Although I have came across the subject many times, your method of delivery is insightful and gives a different, but interesting perspective on Valuation. I am just curious if you have tutorials on how to pull out the data from various sources in order to come up with some of the statistics available on your web page. For exampled, the ERP & Country Risk Premiums. I understand that it will require the standard deviations of emerging market equities and bond indices, but I can't seem to find them through google searches. Is the information only available through databases like Capital IQ?
i think there is one mistake with standard deviation of equity/standard deviation of bonds. The stdev of equity/ stdev of bonds compares the difference in volatility in government bonds and stocks but the difference in volatility and relationship between them isnt linear otherwise we could apply the same thing to US 10 year government bond and S&P to find the equity market premium. The method seems far fetched just to give a premium big enough to non-US countries, a premium that tries hard to exceed 1% that's why all the additional needed factors. Default spread shouldnt be multiplied by that additional factor because the fact that stocks are more risky than Bonds is already factored on the market premium. The only reason that you should multiply by a factor would be if you could prove that emerging markets difference in volatility between stocks and bonds is greater than the difference in volatility between stocks and government bonds in mature markets. I recognize the need to quantify the risk and hope you working towards it because sincerely no one seems to work on it and high paid wallstreet guys use your numbers blindly . It's amazing how one guy with good intentions can influence the markets that much.
Hi Professor great video once again. Has there been any academic approach to determine the liquidity risk in determining and equity ERP by taking a look at the size of bid ask spreads?
You are great sir. I pray to God for your well being always. Please spread your knowledge as much as possible.🙏🙏
Should you really use minus rates in valuation as there always is the cash option with 0?
Sir, in the graph depicting risk free rates by currency, I think the red portion shows the risk free rate ( as also mentioned in the graph) but then you explained it otherwise. (49:47). Can you please clarify once?
Hello, in 1st problem can we subtract the credit default spread from the Risk free rate based on the credit rating of the country? since now that they all ll be AAA rated rates, we can take take weighted average.
why is the bond rate in step one 3.63% different from its government bond rate of 6.77%?
When using approach 2 to figure out the CDS spread for a country why would you subtract the CDS of the US? Shouldn't we subtract by a value lower than 0.18% otherwise we are implicitly assuming that the US bond rate is risk free?
yes because we are assuming that US is risk-free in this case. if you feel that it is not, feel free to choose other countries as a proxy for riskfree
Hi, Professor
When you are explaining risk-free rate for Europe cant we take an average of all countries, risk-free rate considering each Europe
as states of Europe union, just like for the US
Hi Professor, We have seen the Risk Free Rate = Real Interest rate + Expected inflation rate. Over the years, is the change in risk-free rate only due to changes in the expected inflation rate or the real interest rate also changes?
When we use the the gov bond yield as risk free do we take the spot yield rates or should we take an average over a period?
If you buy a bond today, do you expect to earn a spot yield rate, or a period average?
Dear sir,
Please could you make an explicit video or explain how sovereign default is preferred way than overprinting money and hyper-inflation? Because as we can see in many sovereign default cases like Greece, Lebanon, Germany(in post world war phase) some other country had to pull out them of the deep and then they have a great power over these defaulted countries. Isn't it much harmful to the country overall? So how "Sovereign Default preferred over Debasement" ?
Thank you!
Sir, from where did u take the number of 5.20% as ERP for US. I remember u saying that u will explain later but I think u didn't.
look at the next lecture, the implied premiums part
mr Aswath. i am a beginning student of economics/finance, do you have any recommendations for good podcasts/youtube channels (besides this one of coarse) that i could use to further my understanding of markets/current events?
Bloomberg
The Economist
Financial Times
This should get you started.
@@Михаил-д6х1з thank you (although i'm skeptical of bloombreg since they have been pushing an agenda to the deficit of the facts in their political reporting, is the financial section better?)
@x10mark2 I read it for the financial pieces, I don't care much for politics. Also try abnormalreturns.com if you're into investing.
@x10mark2 Just out of curiosity, what agenda have they been pushing?
@@Михаил-д6х1з as to the recommendations. thank you i will read them. as the the agenda. things like publishing "child gun deaths" while including 19 and 20 year olds and framing it as if these are accidental in home deaths but including gang members in that number, whatever side of the debate you are on i think its misleading to use gang members killing gang members (which is where the vast majority of these deaths came from) to claim that there is an epidemic of children dying in their home from unsecured firearms and the like, and in case you think it was an honest mistake 19 and 20 year old's don't legally count as children and the claim was an in house study not just a citation
Great videos
and this time I am attending full classes
Hi Professor. First off, thank you for making your knowledge and teachings available to the public. Although I have came across the subject many times, your method of delivery is insightful and gives a different, but interesting perspective on Valuation.
I am just curious if you have tutorials on how to pull out the data from various sources in order to come up with some of the statistics available on your web page. For exampled, the ERP & Country Risk Premiums. I understand that it will require the standard deviations of emerging market equities and bond indices, but I can't seem to find them through google searches.
Is the information only available through databases like Capital IQ?
Appreciate these videos!
Very useful lecture, thanks a lot
i think there is one mistake with standard deviation of equity/standard deviation of bonds. The stdev of equity/ stdev of bonds compares the difference in volatility in government bonds and stocks but the difference in volatility and relationship between them isnt linear otherwise we could apply the same thing to US 10 year government bond and S&P to find the equity market premium. The method seems far fetched just to give a premium big enough to non-US countries, a premium that tries hard to exceed 1% that's why all the additional needed factors. Default spread shouldnt be multiplied by that additional factor because the fact that stocks are more risky than Bonds is already factored on the market premium. The only reason that you should multiply by a factor would be if you could prove that emerging markets difference in volatility between stocks and bonds is greater than the difference in volatility between stocks and government bonds in mature markets. I recognize the need to quantify the risk and hope you working towards it because sincerely no one seems to work on it and high paid wallstreet guys use your numbers blindly . It's amazing how one guy with good intentions can influence the markets that much.
I can't download Post class test solution
Hi Professor great video once again. Has there been any academic approach to determine the liquidity risk in determining and equity ERP by taking a look at the size of bid ask spreads?
Liquidity is not incorporated in the ERP, it is a discount you apply to the end number of your valuation.
Slides cant by downloaded
Fixed now, I think. Sorry about that.
@@AswathDamodaranonValuation thanks you are the best!!
@@AswathDamodaranonValuation can you reupload the test solution. It can't be downloaded