risk-free return

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Risk-Free Return

The return on any investment with such low risk that the risk is considered to not exist. A common example of a risk-free return is the return on a U.S. Treasury security. The risk-free return exists in order to compensate the investor for the temporary tying up of his/her capital, even though it is not put at risk. See also: Capital Allocation Line, riskless investment.

risk-free return

The annualized rate of return on a riskless investment. This is the rate against which other returns are measured. See also excess return.

Risk-free return.

When you buy a US Treasury bill that matures in 13 weeks, you're making a risk-free investment in the sense that there's virtually no chance of losing your principal (since the bill is backed by the US government) and no threat from inflation (since the term is so short).

Your yield, or the amount you earn on that investment, is described as risk-free return. By subtracting the risk-free return from the return on an investment that has the potential to lose value, you can figure out the risk premium, which is one measure of the risk of choosing an investment other than the 13-week bill.

References in periodicals archive ?
Contract notice: Financial market data for the calculation of risk-free interest rates term structures, symmetric adjustment to equity risk and for other needs, divided into 2 lots.
In Table 4 we show the estimated prices of the illustrative mortality-linked security under different assumed risk-free interest rates.
The important recommendations were that there is a need to expedite the issuance of a public debt law that will pave way for the issuances of government bonds and building yield curve to be used as a reference for nominal risk-free interest rates, and that there should be an alternative for bank financing, and that the existence of long-term investment funds necessary for completing the infrastructure for the market.
The former would work to reduce long-term risk-free interest rates and, if undertaken one country at a time, it would also induce a devaluation of the currency.
spread between the domestic and foreign risk-free interest rates as they
Is flexible enough to calculate the effects of changes in volatility factors, risk-free interest rates, dividends and estimates of expected early exercise over the option's term.
t] > 1, then increases to risk-free interest rates imply increments of yield spreads.
0]--the ratio of callable long and non-callable duration-matched risk-free interest rates.
Specifically, they are: low-grade municipal bonds as an asset class may (1) show evidence of possessing a higher proportion of calls and/or weaker call protection than high-grade municipal bonds; and (2) demonstrate a return generation process which would suggest that changes in risk-free interest rates and/or the economy account for a significant amount of the relative return variation in the low-grade municipal market overall.
The measurement would not be adjusted after the date of grant for any fluctuations in the underlying stock price, dividend yield, risk-free interest rates, or expected price volatility.
Assuming that risk-free interest rates return to historical levels, operating earnings-based returns on average equity that fail to approximate 10% or higher, which compares to PartnerRe's 2006-2010 average of between 16%-17%;
The main advantages of the analysis are the possibility to determine the sensibility of the risky prices before variations of risk-free interest rates in the Spanish market and the construction of a conditional volatility model that overcomes the linearity models of constant variance.