The Risk-Free Rate in Futures, Slash Swaps and Options Contracts

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Alexi: To really do Ron's experiment well, wouldn't one have to adjust the financing cost of a margin on a yearly basis to reflect the risk-free rate at the time of borrowing? I am not sure of the mechanism, but I have to imagine that the risk- free rate is accounted for in the borrowing cost of the embedded leverage in futures, slash swaps and options contracts. And in his second email, the dude writes.

In this episode we answer emails from Thirsty Horse, Alexi (a/k/a "the Dude") and Mark. We discuss our charity, assorted Monte Carlo simulations on Portfolio Visualizer and data sources, rebalancing of leveraged portfolios and the choice of leverage (follow up on Episode 259), Flight of the Conchords, and the pitfalls of trying to use valuation metrics as crystal balls.

And THEN we our go through our weekly portfolio reviews of the seven sample portfolios you can find at Portfolios | Risk Parity Radio.

Additional links:

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Monte Carlo Analysis of basic Golden Ratio portfolio back to 1994: https://tinyurl.com/mswkra9c

Monte Carlo Analysis of Golden Ratio portfolio back to the 1970s: https://tinyurl.com/hzd6xftt

Portfolio Charts Retirement Spending Calculator: RETIREMENT SPENDING – Portfolio Charts

Michael Kitces Optimized Rebalancing Articles: Optimal Rebalancing – Time Horizons Vs Tolerance Bands (kitces.com)

Aswath Damodaran on Long View Podcast: Aswath Damodaran: A Valuation Expert’s Take on Inflation, Stock Buybacks, ESG, and More | Morningstar

Aswath Damodaran/Equity Risk Premium: Damodaran On-line Home Page (nyu.edu)

Errant 2013 Paper re 4% Rule: delivery.php (ssrn.com)

Kitces CAPE Ratio Article 2014: Shiller PE: Bad Market Timing, Good Retirement Planning (kitces.com)

Kitces CAPE Ratio Article 2016: Reducing Retirement Return Assumptions For High Valuation? (kitces.com)