Risk free rate of return

From ACT Wiki
Revision as of 11:56, 12 August 2013 by imported>Doug Williamson (Source: http://www.bis.org/publ/bppdf/bispap72l.pdf)
Jump to navigationJump to search

The theoretical rate of return which can be earned on hypothetical investments which are considered to be risk-free for modelling purposes.


Historically, the rates of return on certain types of domestic central government debt were considered to be a close enough proxy for such hypothetical risk-free investments.

In the modern era, domestic central government debt is no longer considered to be risk-free for this purpose, nor for a number of other purposes for which it was historically considered to be risk-free.


See also