Risk premium: Difference between revisions
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imported>Doug Williamson (Create the page. Source: IFRS 13, page A631.) |
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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. | 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]] | *[[Fair value]] | ||
*[[Hurdle rate]] | |||
*[[IFRS 13]] | *[[IFRS 13]] | ||
*[[Market participant]] | *[[Market participant]] | ||
*[[Market risk premium]] | *[[Market risk premium]] | ||
*[[ | * [[Premium]] | ||
*[[Rational]] | |||
*[[Risk appetite]] | |||
*[[Risk averse]] | |||
*[[Risk free rate of return]] | |||
*[[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.
