Risk premium: Difference between revisions

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*[[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]]



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