RMBS and Risk premium: Difference between pages
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imported>Doug Williamson (Add explanation of abbreviation.) |
imported>Doug Williamson (Add 2nd definition. Source: Linked pages.) |
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1. ''Financial reporting - fair valuation.'' | |||
For financial reporting and fair valuation purposes, risk premium is defined as additional compensation sought by rational risk-averse market participants for bearing the uncertainty inherent in the cash flows of an asset or a liability. | |||
This is a similar concept to market risk premium in the Capital asset pricing model. | |||
2. | |||
More broadly, value ascribed by any market participant to a reduction in uncertainty. | |||
This value would not necessarily be the same for all market participants. | |||
== See also == | == See also == | ||
* [[ | *[[Capital asset pricing model]] | ||
* [[ | *[[Fair value]] | ||
* [[ | *[[IFRS 13]] | ||
* [[ | *[[Market participant]] | ||
* [[ | *[[Market risk premium]] | ||
* [[ | *[[Rational]] | ||
* [[ | *[[Risk appetite]] | ||
* [[ | *[[Risk averse]] | ||
*[[Risk management]] | |||
[[ | |||
Revision as of 13:26, 9 June 2020
1. Financial reporting - fair valuation.
For financial reporting and fair valuation purposes, risk premium is defined as additional compensation sought by rational risk-averse market participants for bearing the uncertainty inherent in the cash flows of an asset or a liability.
This is a similar concept to market risk premium in the Capital asset pricing model.
2.
More broadly, value ascribed by any market participant to a reduction in uncertainty.
This value would not necessarily be the same for all market participants.
