Notional pooling and Risk free rate of return: Difference between pages
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(Rf). | |||
The | The theoretical rate of investment returns which can be earned on hypothetical investments which are considered to be risk-free for modelling purposes. | ||
The Capital asset pricing model (CAPM) incorporates this type of risk-free rate. | |||
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. | |||
====Interest rate benchmarks==== | |||
The term 'risk-free rates' (RFRs) is also used in the context of interest rate benchmark rates. | |||
For example, risk-free rates that might be used as alternatives to LIBOR. | |||
== See also == | == See also == | ||
* [[ | * [[Benchmark]] | ||
* [[ | * [[Capital asset pricing model]] | ||
* [[ | * [[Credit spread ]] | ||
* [[Interest rate | * [[Gilts]] | ||
* [[Interest rate risk]] | |||
* [[LIBOR]] | |||
* [[RFR]] | |||
* [[Risk-free rates]] | |||
[[Category: | [[Category:Corporate_financial_management]] | ||
Revision as of 12:50, 15 February 2018
(Rf).
The theoretical rate of investment returns which can be earned on hypothetical investments which are considered to be risk-free for modelling purposes.
The Capital asset pricing model (CAPM) incorporates this type of risk-free rate.
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.
Interest rate benchmarks
The term 'risk-free rates' (RFRs) is also used in the context of interest rate benchmark rates.
For example, risk-free rates that might be used as alternatives to LIBOR.
