In our initial analysis of the effect of firm-specific risk on incentives we assume there is no market risk, so that WACC equals the
riskless interest rate.
The interpretations and exemptions involve derivatives, intraday extensions of credit, and transactions involving depository institution loans made to a customer who uses the loan's proceeds (1) to purchase a security or other asset through a depository institution broker-dealer affiliate that acts as a
riskless principal or (2) to purchase a security from a depository institution broker-dealer affiliate when the loan was made pursuant to a pre-existing line of credit that was not entered into in contemplation of the purchase of securities from the depository institution affiliate.
* claims that trading medium term notes (MTNs), prime bank notes, or any other bank instruments, on a
riskless basis, will yield above market average returns; and
designed to affect share prices and returns," and that these actions, the object of which was to convince investors that bank shares were
riskless, caused the subsequent collapse.
They will find it difficult to get loans as banks prefer
riskless investments in government securities in a high-interest rate environment.
These claims are treated as
riskless in the risk management of banks despite the Greek haircut of 2012.
This typically sees the purchase and sale — at the same time — of the stocks of two merging companies to create what a fund may consider to be "
riskless" profits.
Specifically, consider a household that finds it's best to split its wealth 50-50 between risky and
riskless investment at any age.
FINRA also requires substantial recordkeeping by firms of principal and of
riskless principal transactions.
* Julian Kozlowski, New York University and Laura Veldkamp and Venky Venkateswaran, New York University and NBER, "The Tail that Keeps the
Riskless Rate Low" (NBER Working Paper No.