Rate without risk
In finance, and for the economy in general, the rate without risk in a currency and for one particular period is the Interest rate noted on the market of the Government loans of countries considered solvent and intergovernmental organizations for the same currency and the same period.
One thus indicates thus the absence of Credit risk, and not any absence of Risque of rate, which remains to him quite present.
Precautions for use
As for all interest rates, it is advisable to specify which bases and conventions of calculation apply. Different conventions of calculation give measurements of interest rate almost as different as, for the temperatures, of the degrees Celsius and the degrees Fahrenheit… The Annual percentage rate constitutes a measure certainly vague but convenient and unifying.In addition, certain Government loans, as recent private individuals those, can have following a specific strong demand, a Prime of negative liquidity, which it is advisable to be unaware of. It is rather frequently the case, for example, for the emissions in the course of loans at 10 years, which it is of Bunds or OAT for the Euro area, or of T-Note S at 10 years for the dollar area, not yet enough liquid to be arbitrated, and which can cause a hollow of several, even of several tens of basic points in the Courbe of rate of the Government loans.
Lastly, the markets of interest rate move very quickly, in particular in the event of publication of surprising economic statistics or unexpected political events. The rate noted at a given moment will not be necessarily that noted a few moments later.
See too
- Money market
- Bond market
- Curve of rate
- brought up to date Value
- Annual percentage rate
- Rate zero-coupon
- Discount coefficient
- Allowance for risk
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