Risk-free asset

(redirected from Riskless Asset)

Risk-free asset

An asset whose future normal return is known today with certainty.

Risk-Free Asset

An asset in which the return is known with certainty. The certainty generally comes from a supreme amount of confidence in the issuer of the asset; for example, Treasury securities are considered risk-free because the United States government is considered the best possible issuer. Critics contend that there is no such thing as a risk-free asset because, in theory, even the US government could default. However, risk-free assets have such a low level of risk that it may be ignored. Nonetheless, risk-free assets usually have a low rate of return, and, as a result, even these are exposed to inflation risk.
References in periodicals archive ?
Using the notation in the previous section, it can be verified that the riskless asset reconstitution assumption of Mayers and Smith (1987) and subsequent researchers essentially requires that given any loss state s, I ([?
We assume also that there exists a riskless asset, denoted by B with an instantaneous rate r.
How should he or she efficiently combine PCS options in this insurance portfolio with the riskless asset in order to obtain the desired expected return with a minimum variance?
Min] is greater than 1 (the riskless asset is taken as numeraire.
Consider a trinomial discrete model with a riskless asset denoted by B, a risky asset V and an option S on V.
To compare the incentives of a pre-ERISA (nonfiduciary) and post-ERISA (fiduciary) private pension fund administrator assume that the alternative investment opportunities available to the fund are a riskless asset yielding [R|.
Participants will trade two assets, a one-period riskless asset and a long-lived stock, in an environment consistent with the existence of asset price bubbles in equilibrium.
For long-horizon investors, long-term inflation-indexed bonds are the riskless asset.
it] is the excess return of asset i over the riskless asset return in time period t, [[alpha].
Rather, we assume an incomplete market structure in which the riskless asset is the only vehicle for saving and wealth accumulation, as in the classic models of optimal consumption and saving decisions.
The household can save through a riskless asset and the stock market and makes decisions at an annual frequency.