3 ms·
> interest rates should be vaguely proportional to risk. Not really. If we take nominal interest rate = real rates + inflation expectation + credit spread, the
by FabHK 4y ago
> interest rates should be vaguely proportional to risk.
Not really. If we take nominal interest rate = real rates + inflation expectation + credit spread, then only the (counter party dependent) credit spread reflects riskiness. Real rates reflect an equilibrium of time preferences.