Difference between revisions of "Risk free rate of return"
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(Source: http://www.bis.org/publ/bppdf/bispap72l.pdf) |
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| − | The rate of return which can be earned on investments which are considered to be | + | The theoretical rate of return which can be earned on hypothetical investments which are considered to be risk-free for modelling purposes. |
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| + | 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. | ||
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| + | 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. | ||
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== See also == | == See also == | ||
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* [[Gilts]] | * [[Gilts]] | ||
* [[Interest rate risk]] | * [[Interest rate risk]] | ||
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Revision as of 11:56, 12 August 2013
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.
