https://www.bis.org/publ/bppdf/bispap72l.pdf
The idea of risk-free sovereign bonds is best thought of as an oxymoron or as an anomaly of recent history. It is not a useful, necessary or an enduring feature of the financial landscape.
In order to think clearly about “risk-free” we should be specific about the meaning of risk. Risk is deviation from objective and, thus, risk is relative. We each have different objectives and different circumstances so there are different things that can divert us from our objectives. Most financial intermediaries specify a liability, an expected return or an entire benchmark portfolio as their objective and measure risk as deviation from that.
Statistics: Posted by alluringreality — Mon Dec 02, 2024 8:21 am