Risk premium: Difference between revisions

From ACT Wiki
Jump to navigationJump to search
imported>Doug Williamson
(Add 2nd definition. Source: Linked pages.)
imported>Doug Williamson
(Add link.)
 
(2 intermediate revisions by the same user not shown)
Line 16: Line 16:
*[[Capital asset pricing model]]
*[[Capital asset pricing model]]
*[[Fair value]]
*[[Fair value]]
*[[Hurdle rate]]
*[[IFRS 13]]
*[[IFRS 13]]
*[[Market participant]]
*[[Market participant]]
*[[Market risk premium]]
*[[Market risk premium]]
* [[Premium]]
*[[Rational]]
*[[Rational]]
*[[Risk appetite]]
*[[Risk appetite]]
*[[Risk averse]]
*[[Risk averse]]
*[[Risk free rate of return]]
*[[Risk management]]
*[[Risk management]]
[[Category:The_business_context]]
[[Category:Identify_and_assess_risks]]
[[Category:Risk_frameworks]]
[[Category:Cash_management]]
[[Category:Financial_products_and_markets]]
[[Category:Liquidity_management]]

Latest revision as of 18:00, 29 December 2022

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