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Risk-Free Rate in the Covid-19 Pandemic: Application Mistakes and Conclusions for Traders

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  • Magomet Yandiev

Abstract

This short paper is intended to demonstrate a crucial omission made by traders in setting the risk-free interest rate, especially in times of crisis: instead of increasing the risk-free rate, traders undercut it en masse on the contrary. This results in incorrect investment and financial decisions, especially those involving CAPM models, option pricing models and portfolio theory.

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  • Magomet Yandiev, 2021. "Risk-Free Rate in the Covid-19 Pandemic: Application Mistakes and Conclusions for Traders," Papers 2111.07075, arXiv.org.
    • Handle: RePEc:arx:papers:2111.07075
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    References listed on IDEAS

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