Into the Abyss: What If Nothing is Risk Free?

ArXiv ID: ssrn-1648164 “View on arXiv”

Authors: Unknown

Abstract

In corporate finance and investment analysis, we assume that there is an investment with a guaranteed return that offers both firms and investors a “risk free”

Keywords: corporate finance, risk-free rate, investment analysis, cost of capital, capital budgeting, Corporate Equity

Complexity vs Empirical Score

• Math Complexity: 4.0/10
• Empirical Rigor: 2.0/10
• Quadrant: Philosophers
• Why: The paper focuses on conceptual discussions and theoretical implications of the risk-free rate, with moderate mathematical notation but no complex derivations or empirical data; it lacks backtesting or implementation details.

  flowchart TD
    Q["Research Question: Is a truly Risk-Free Rate Possible?"] --> M["Methodology: Review & Analysis"]
    M --> D["Data: Historical Defaults & Macro Shocks"]
    D --> C["Computation: Modeling & Scenario Analysis"]
    C --> F["Key Findings: No True Risk-Free Asset Exists"]
    F --> O["Outcome: Adjusted Cost of Capital Models"]