Risk-free asset

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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 ?
Volatility is the entry price we pay for making returns higher than those available from risk-free assets.
Second, some passive traders do not participate in the equity market and hold only risk-free assets.
Many people, especially in the United Kingdom and the US, seem to believe that "solving" the euro crisis means returning to the Elysian state in which all European government bonds are equally risk-free assets.
I examine how anticipating the disutility from envy a worker may feel when using his co-worker's DC plan performance as a benchmark affects his retirement account allocation between risky and risk-free assets.
While the general level of uncertainty is still so high, a major reallocation from risk-free assets into equities is unlikely.
Shares stayed out of favor worldwide for another week as investors kept preferring risk-free assets.
None of us really know when the tide for owning risk-free assets will shift.
Next, the universe of risk-free assets is declining.
While consumers avoid expenditures in durables and increase their level of precautionary savings, businesses put investment and expansion plans on hold and choose instead to hold risk-free assets.
Finally, equity valuations are very attractive relative to risk-free assets.
Redefining net worth to exclude risk-free assets makes complete sense, as SECU President/CEO Jim Blaine demonstrated just a couple weeks ago (CU Times, Jan.
Of course, there is a lot of sidelined capital in Treasuries, money markets and other relatively risk-free assets that can continue to feed the speculative rally; but eventually, risk will outrun the reasonable expectation of returns and the tap for capital will be turned off.