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What will be the risk-free rate and benchmark yield curve following European monetary union?

Brooks, C. and Skinner, F. (2000) What will be the risk-free rate and benchmark yield curve following European monetary union? Applied Financial Economics, 10 (1). pp. 59-69. ISSN 0960-3107

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To link to this item DOI: 10.1080/096031000331932

Abstract/Summary

Using a linear factor model, we study the behaviour of French, Germany, Italian and British sovereign yield curves in the run up to EMU. This allows us to determine which of these yield curves might best approximate a benchmark yield curve post EMU. We find that the best approximation for the risk free yield is the UK three month T-bill yield, followed by the German three month T-bill yield. As no one sovereign yield curve dominates all others, we find that a composite yield curve, consisting of French, Italian and UK bonds at different maturity points along the yield curve should be the benchmark post EMU.

Item Type:Article
Refereed:Yes
Divisions:Henley Business School > ICMA Centre
ID Code:35966
Publisher:Taylor and Francis

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