In Search of Safe Havens: The Trust Deficit and Risk-free Investments!
ฝัง
- เผยแพร่เมื่อ 13 มิ.ย. 2024
- Every introductory finance class starts by introducing a "risk-free" investment, and the return on that investment becomes an ingredient in almost every aspect of corporate finance and investing. The standard practice for estimating this rate is to use the rate on a government bond, but that presumes that governments, because of their control of money printing, never default. The recent downgrade of the US, by Fitch, from AAA to AA+, challenges that notion, and in this session, I argue that default risk is a clear and present danger even when governments borrow in the local currency, and that when it exist, getting to a risk-free rate becomes messier, and there can be consequences for risk premiums.
Slides: pages.stern.nyu.edu/~adamodar...
Blog Post: aswathdamodaran.blogspot.com/...
You are a true philanthropist the content you put out is extremely informative
Thank you Pref Damodaran. Excellent and educative
The last couple of minutes is the gem of this video.
Thank you for your kind and great works for everyone!!!
Great session Sir
Thank you Professor, these are invaluable
I love your perspective, and unassuming demeanor.
You're great for corporate finance sir
Thank you so much! Really great video
Thank you for this excellent session
It would be also interesting to take a look at the correlation between the assumed risk free rate and risky assets like stocks, bonds, options, commodities in different market conditions. And thank you for setting the floor for enticing discussion!
Many thanks 🙏🏻
Thank you professor.
God bless
Thank you Professor
The professor himself!!!
Big fan sir ❤
Did you take down some of your previous sessions?! Specifically the dark side to valuation lectures you recently gave, I was enjoying the series :(
Not permanently. They should be back up after the videos get edited.
@@AswathDamodaranonValuation thanks keep up the amazing work, also you'd make a great podcast host! If you ever want to start one let me know, I'd help you for free :D!
The only risk free rate is rate that is paid by the central bank itself. In the US it's the return you get on reverse repo facility. The central bank, unlike the government, can issue money to repay its liabilities
Prof AD,
Excellent lesson. Thank you Sir. Can we simply say those countries with AAA and their bond offers risk free rate. But, all other countries including USA offer minimum risk rate instead of Risk-free rate. Else, risk free becomes a misnomer
I named my rouge in Balders Gate 3 Aswath Damodaran
@ashwath damodaran. I eventually put the money in India, real estate, gyms, agriculture, many more. India got all the skills to manufacture every device, car. new India is educated. got the skill to produce all the goods for the world.
given the bad panorama for investment in a high inflation economy, why would one even begin to think about subtracting from a gov bond to calculate a risk free rate?
So, if a currency’s worthiness can be rated by the big 3, how would the comparable default risk of bitcoin or other virtual currencies rank? Or has this been done already?
Thanks for this. By the way there should be 2012 not 2002 in slide 13
How has the cutoff between the market as a voting versus weighing machine changed over time, I wonder. Considering the seemingly speculative percentage of value added for AI potential to stocks...I can look to real output/growth. That gets adjusted. Initial then adjusted numbers. That surprise is a risk that seems omitted here, an e, if you will. Why not present risk free rate as +/-?
only God is risk free. Even us money says "In God we Trust "
Inflation in india is 5% and real growth rate is 6% but govt t bill is 7%. Could somebody decipher the anomaly?
How can the Feds balance sheet expanding to 8T dollars not have an effect on the risk free rate! It must be the largest holder of US bonds in the world? if the bond market is value at 50T ...then that works out to almost 15% of the market...more when it comes to treasuries...if I own 15% of something ...I could easily move its price.
How come Jim Kramer and all the other yappers out there never talk about these things.
The last couple of minutes is the gem of this video.