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Showing posts from April 15, 2019

Risk-free interest rate

The risk-free interest rate is the rate of return of a hypothetical investment with no risk of financial loss, over a given period of time. [1] Since the risk-free rate can be obtained with no risk, any other investment having some risk will have to have a higher rate of return in order to induce any investors to hold it. In practice, to infer the risk-free interest rate in a particular situation, a risk-free bond is usually chosen—that is, one issued by a government or agency whose risks of default are so low as to be negligible. Contents 1 Theoretical measurement 2 Proxies for the risk-free rate 3 Application 4 See also 5 References Theoretical measurement As stated by Malcolm Kemp in Chapter five of his book Market Consistency: Model Calibration in Imperfect Markets , the risk-free rate means different things to different people and there is no consensus on how to go about a direct measurement of it. One interpretation of the theoretical ri...

Credit rating

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A credit rating is an evaluation of the credit risk of a prospective debtor (an individual, a business, company or a government), predicting their ability to pay back the debt, and an implicit forecast of the likelihood of the debtor defaulting. [1] The credit rating represents an evaluation of a credit rating agency of the qualitative and quantitative information for the prospective debtor, including information provided by the prospective debtor and other non-public information obtained by the credit rating agency's analysts. Credit reporting (or credit score) – is a subset of credit rating – it is a numeric evaluation of an individual's credit worthiness, which is done by a credit bureau or consumer credit reporting agency. Contents 1 Sovereign credit ratings 2 Short- and long-term ratings 3 Corporate credit ratings 4 See also 5 References 6 External links Sovereign credit ratings A sovereign credit rating is the credit rating o...

Serial Default and Capital Flows

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Emerging market

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An emerging market is a country that has some characteristics of a developed market, but does not satisfy standards to be termed a developed market. [1] This includes countries that may become developed markets in the future or were in the past. [2] The term "frontier market" is used for developing countries with smaller, riskier, or more illiquid capital markets than "emerging". [3] The economies of China and India are considered to be the largest emerging markets. [4] According to The Economist , many people find the term outdated, but no new term has gained traction. [5] Emerging market hedge fund capital reached a record new level in the first quarter of 2011 of $121 billion. [6] The four largest emerging and developing economies by either nominal or PPP-adjusted GDP are the BRIC countries (Brazil, Russia, India and China). Contents 1 Terminology 2 Commonly listed 3 BBVA Research 4 Emerging Market Bond Index Global 5 Emerging ...