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Risk
Risk Premium
Excess return over risk-free rate demanded by investors
Definition
Risk premium compensates investors for bearing risk beyond the risk-free rate. Formula: Expected Return - Risk-Free Rate. Equity risk premium averages 4-6% historically. Varies by asset class and market conditions.
Related Topics
#expected return
#risk compensation
#asset pricing
#equity premium
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Category: Risk
Risk management involves identifying, assessing, and controlling potential losses in investment portfolios.
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