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Riskless Rate

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Riskless rate
The rate earned on a riskless investment, typically the rate earned on the 90-day US Treasury Bill.

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.


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Since 2003, the riskless rate of return has been abnormally low as central banks kept overnight rates low for a long time after a brief deflation scare in the United States and a prolonged scare in Japan.
Comparing the average change in the one-month riskless rate from the day before a change in the policy target to the day after suggests that policy actions are largely anticipated.
The accompanying chart compares at varying loss ratios the present value net ceded premium relative to the present value ceded losses at a riskless rate of return of 6% per annum.
 
 
 
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