Market price of risk

Market price of risk

A measure of the extra return, or risk premium, that investors demand to bear risk. The reward-to-risk ratio of the market portfolio.

Sharpe Benchmark

In financial econometrics, a model for a portfolio's performance that attempts to account for a money manager's index-like tendencies. In other words, the Sharpe benchmark attempts to statistically calculate whether a portfolio's success was due to good management or the taking of excessive risk. The model measures a company's or portfolio's performance against a series of securities indices.
References in periodicals archive ?
First, they miss the market timing if the volatility of the market price of risk is not constant in the equilibrium.
m] denotes the return of the market portfolio at time t = 1 and [eta] stands for the market price of risk, such that [eta] = (E([r.
8) The financial tools used to determine the market price of risk implied in hedging debt and commodities form the basis for valuing an EPA clause.
Exploiting this condition, Vasicek obtains a bond pricing formula that expresses the price of bonds of various maturities as a function of the spot interest rate, the market price of risk, and other model parameters.
Assume that the market price of risk satisfies sufficient regularity conditions to characterize the non arbitrage assumption by the existence of a risk-neutral probability measure [Q.
Jagannathan and Wang (1996) assume the CAPM holds conditional on the information set available at a particular time, but that betas and the market price of risk vary over time.
Lustig, "Is the Volatility of the Market Price of Risk due to Intermittent Portfolio Re-balancing?
If r - [rho] is held fixed, a higher market price of risk [theta] will bring about sharp gradient of the expected consumption, thus a more prudent the investor will be.
Such independency among risks is also a fundamental assumption in setting the market price of risk.
If the market price of risk changes, as other evidence from financial markets suggests, it introduces noise into the process of credit spread changes, so the tenuous relationship between credit spread changes and accounting-risk variables is not surprising.
which relates the expected excess return on asset i to beta and the market price of risk.
Given this supply response, one might view the increase in spreads as an indication that the market price of risk in the bond market had increased.