Risk-Free

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Risk-Free

Describing a transaction or investment in which the return is known with certainty. The certainty generally comes from a supreme amount of confidence in the issuer of the investment; for example, Treasury securities are considered risk-free investments because the United States government is considered the best possible issuer. Critics contend that there is no such thing as a risk-free investment because, in theory, even the US government could default. However, risk-free investments have such a low level of risk that it may be ignored. Risk-free investments usually have a low rate of return and, as a result, are exposed to inflation risk.
References in periodicals archive ?
To grab these Riskless Profits, though, there are several structural and measurement barriers and faulty paradigms that all parties must overcome.
It is convenient to assume that all premia are invested in riskless bonds.
In order to simplify the analysis we assume that the hedge is riskless, this in turn requires that the firm be sufficiently profitable so that it can enter into a riskless hedge.
CAPM and equilibrium in the market for riskless assets
Because this payoff is riskless, the portfolio of a short call option and 1/2 share of the stock must earn the riskless return.
A riskless asset is one in which the investor knows the expected return with certainty.
The log riskless interest rate is negatively related to the conditional expectation of the log SDF.
The equity premium, computed as the total expected return on common stocks less that on riskless debt, prices the risk taken by investors in purchasing equities rather than risk-free debt.
In our initial analysis of the effect of firm-specific risk on incentives we assume there is no market risk, so that WACC equals the riskless interest rate.
b93], we discount 1993 share values (after the banks were partially sold to the public) back to 1983, discounting by rates of return equal to the riskless rate plus 70% of market return in excess of that rate.
Mean-variance analysis treats cash as the riskless asset, and treats bonds merely as another risky asset like stocks.
Built on the principles that technology is fun, and that risk can be riskless, and on an ambience which combines routine social interaction with orchestrated leisure, the modern UED has become an important cultural and economic feature of the urban landscape.