Risk premium

Risk premium

1. The higher expected return (in the sense of mathematical expected value) that an uncertain asset must pay in order for risk averse investors to be willing to hold it. 2. The difference between the interest rate on a risky asset and that on a safe one. 3. In exchange markets the difference between the forward rate and the expected future spot rate.

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Part of Speech: noun
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Industry/Domain: Economy
Category: International economics
Company: University of Michigan
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risk premium

Banking; Investment banking

Premium demanded by investors for investing in risky capital investments. The higher the risk of loss or default, the higher the premium.

risk premium

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The extra return that investors require to hold a risky asset instead of a risk-free one; the difference between the expected returns from a risky investment and the risk-free ...

risk premium

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1. The higher expected return (in the sense of mathematical expected value) that an uncertain asset must pay in order for risk averse investors to be willing to hold it. 2. The ...

risk premium

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The additional interest required by lenders as compensation for the risk that a borrower may default; more generally, the extra return required to compensate an investor.

risk premium

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The reward for holding the risky equity market portfolio rather than the risk-free asset. The spread between Treasury and non-Treasury bonds of comparable maturity.

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