Market price of risk

Market price of risk

A measure of the extra return, or risk premium, that investors demand to bear risk. The reward-to-risk ratio of the market portfolio.

Sharpe Benchmark

In financial econometrics, a model for a portfolio's performance that attempts to account for a money manager's index-like tendencies. In other words, the Sharpe benchmark attempts to statistically calculate whether a portfolio's success was due to good management or the taking of excessive risk. The model measures a company's or portfolio's performance against a series of securities indices.
References in periodicals archive ?
There is, however, a small fraction of households who do participate in the equity market and hence bear a great amount of aggregate risk, which in this article results in a high market price of risk. In equilibrium, those households demand high risk compensation.
where [PHI] denotes the standard normal cumulative distribution function and the parameter [alpha], also called market price of risk, is a direct extension of the Sharpe ratio, which can be calculated by solving
The estimated market price of risk, [lambda], associated with the first three portfolios is 2.707, with a standard error of only 0.859.
The market price of risk [??] is -4.65 with a t-statistic of 2.07.
Weron, "Market price of risk implied by Asian-style electricity options and futures," Energy Economics, vol.
In contrast, recent research on monetary policy transmission channels suggests a higher interest rate increases the market price of risk and induces financial intermediaries to shrink their balance sheets (Adrian and Shin).
and finally, the market price of risk ([eta]) can be obtained using the prices of the traded pharmaceutical companies.
(8) The financial tools used to determine the market price of risk implied in hedging debt and commodities form the basis for valuing an EPA clause.
We show that no-arbitrage arguments restrict the amount of return that investors demand in compensation for bearing a unit of risk (the so-called market price of risk) to be identical across the cross section of bonds.
Jagannathan and Wang (1996) assume the CAPM holds conditional on the information set available at a particular time, but that betas and the market price of risk vary over time.