Risk free rate of return
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Revision as of 11:56, 12 August 2013 by Doug Williamson (Talk | contribs) (Source: http://www.bis.org/publ/bppdf/bispap72l.pdf)
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.