The rate of interest which can be earned without bearing any risks. The rates on Treasury bills and Treasury bonds are naturally assumed to be the right reference risk-free rates for derivative traders or investors. However, LIBOR rates are actually used as short-term risk-free rates since traders and investors view LIBOR as their opportunity cost of capital.
Derivatives
Derivatives have increasingly become very important tools in finance over the last three decades. Many different types of derivatives are now traded actively on ...
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