Exercise - Money Market Rates

Exercise - Money Market Rates#

Data#

Use the data in data/ref_rates.xlsx to explore several key money-market rates.

  • SOFR

  • Fed funds

  • 3-month T-bill yield

1. Exploring Money-Market Rates#

1.#

Plot the time series.

2.#

Calculate the correlation between the three rates (filtering to the dates for which they all have reported values.)

Do this correlation analysis for the data in

  • levels (as provided)

  • differences (day-over-day changes)

3.#

Estimate an autoregression for SOFR:

\[r_{t} = \alpha + \beta\, r_{t-1} + \epsilon_{t}\]

Report the estimated regression beta and r-squared.

Comment on what this regression tells us about the nature of interest rates.

  • That is, can we forecast the next period’s rate?

  • Does the series have autocorrelation?

4.#

Estimate an autoregression for returns of the S&P 500 ETF, SPY, rather than using SOFR. Get data from

  • data/risk_etf_data.xlsx

Are SPY returns autocorrelated? And SPY prices?

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