Riskless rate

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.
References in periodicals archive ?
However in long periods of history there were no inflation-indexed bonds, so to find a good empirical counterpart for the riskless rate is not an easy task.
Pure arbitrage, where, in fact, you risk nothing and earn more than the riskless rate.
When r follows a stochastic process that renders interest rate changes less than permanent, it remains true that the presence of the risk premium reduces the effect on asset prices of changes in the riskless rate.
In the absence of risk aversion, the yield on cocos should then be equal to the riskless rate for their remaining term plus a conversion risk premium that compensates for the expected loss conditional on conversion.
Some research suggests that the Certainty Equivalent Interest Rate might reasonably exceed the riskless rate by about 1.
The riskless rate for real estate is usually higher than what would be used for stock and options valuation, due to the illiquidity, maturity risk premium, lack of diversification, management intensity, and other risks associated with real estate investment.
The net cost is $548,812, precisely the same as if the liability had been discounted and funded using the 4 percent riskless rate of return.
Since the credit risk premium is on top of the interest rate charged for riskless debt, the first step is to understand what moves that riskless rate around.
Under the risk-neutral probability measure, we can replace the drift coefficient [mu] by the instantaneous riskless rate r, and hence R([T.
Also, Miles and Ezzell (1980, 1985) and Arzac and Glosten (2005) proposed to discount tax shields at the riskless rate in the first period but at the unlevered equity rate thereafter.
The riskless rate of interest is taken to be equal to the household's subjective discount rate, and, therefore, will also be denoted by r.
j], as being composed of the corresponding riskless rate, r, plus a risk premium specific to that instrument, say [[rho].