标题: Short-Term YTM vs Long Term YTM on equity risk premium [打印本页] 作者: disiz64 时间: 2013-4-8 20:21 标题: Short-Term YTM vs Long Term YTM on equity risk premium
Hi guys,
can someone explain to me WHY switching from long -term YTM to short term YTM would actually increase the size of the risk premium?
Thanks作者: EastCoastJ 时间: 2013-4-8 20:21
cuz you have no long term financing? that means can’t make payments ie. equity can go down more hence risk is up.作者: tarunajwani 时间: 2013-4-8 20:21
Risk Premium = Market Return - Risk Free Rate
Shorter term treasuries have lower YTM (almost always). So using these will increase the risk premium.作者: nitoha 时间: 2013-4-8 20:22
Ah i was thinking in the context of a build-up Model where you just tag a 3-5% premium onto the YTM of a debt instrument作者: siavosh 时间: 2013-4-8 20:22
This is only true when we have normal yield curve. It’s the other way round when they say that the yield curve is inverted.
