Negative Interest Rates in Capital Market Expectations

I am trying to understand how negative interest rates are used in the CME for both short-term and long-term horizons.

From the curriculum

“Long-run capital market expectations typically take the level of the “risk-free rate” as a baseline to which various risk premiums are added to arrive at long-run expected returns for risky assets such as long-term bonds and equities. The implicit assumption is that the risk-free rate is at its long-term equilibrium level. When short-term rates are negative, the long-run equilibrium short-term rate can be used as the baseline rate in these models instead of the observed negative rate.” —> does this mean we take the negative rate and add the risk premium so that it becomes positive and we use that number as the base for what would be in the long run?

“For shorter time horizons, analysts and investors must consider the expected path of interest rates. Paths should be considered that, on average, converge to the long-run equilibrium rate estimate.” - so what exactly are we using; are we just saying that today the yields are -1% and we expect them to be 0.5% in 90 days?

How are assets valued when we have negative interests rates? When rates are so low and in the negative territory, arent the price of the assets very high?

As it says, you are using long-run equilibrium short-term rate which should be positive (as it includes premiums as well as some other changes in long term, like closing output gap in the long run among the others, but its a bit more complicated). Thus you don’t use negative rate to value in these situations.