Abstract
In this paper we use risk-free short-term interest rates (OISTIRs) derived from equity derivatives prices to make the following four contributions: (i) We introduce and compare different methods how to extract these rates and show that a method based on box spreads performs best. (ii) We compare the results with other benchmark short-term interest rates and show that OISTIRs are higher than BUND rates (30 bps for 3-month tenors), lower than EURIBOR rates (16 bps for 3-month tenors), and almost equal to EUREX repo rates. (iii) In terms of informational sensitivity we find OISTIRs to Granger-cause EURIBOR rates, at least since the year 2013. (iv) We use OISTIRs to de- rive the BUND convenience yield. We identify bond offerings and expansive monetary policy decision to negatively impact these yields, while the risk-free maturity premium has a positive impact. Finally, we think this paper may also contribute to the discussion on how to further develop EURIBOR rates.
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