riskless investment

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Riskless Investment

An investment where 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 riskless investments because the United States government is considered the best possible issuer. Critics contend that there is no such thing as a riskless investment because, in theory, even the US government could default. However, riskless investments have such a low level of risk that it may be ignored. Riskless investments usually have a low rate of return and, as a result, are exposed to inflation risk.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

riskless investment

An investment with a certain rate of return and no chance of default. Although various investments (for example, savings accounts and certificates of deposit at insured institutions) meet these requirements, a Treasury bill is the most common example of a riskless investment.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
References in periodicals archive ?
As the Government of Pakistan (GoP) remains the biggest borrower that also offers lucrative return on its risk-free securities, the high risk consumer finance pie size remains small.
Some analysts tend to perceive that the weekly pumping of billions by the central bank is a sort of indirect budgetary lending to the cash-strapped government that borrows the injected sums from the scheduled banks thorough auctioning its risk-free securities, like Treasury Bills, Pakistan Investment Bonds and Ijara Sukuk.
Their investments are usually limited to risk-free securities, including government bonds and loans to highly rated companies.
This conclusion is summarized in Figure 1, which shows graphically how we impute the value of bank services related to loans ([Y.sup.A]) and deposits ([Y.sup.D]) using data on the interest rate paid on deposits ([r.sup.D]), the interest rate charged on loans ([r.sup.A]), and market interest rates on risk-free securities ([r.sup.F]) and risky securities ([r.sup.M]).
(10) One obvious implication is that no firm--and no bank--would use the return on risk-free securities as the appropriate opportunity cost for an investment with risky payoff.
In the language of finance, the benefits of a privatized Social Security system depend upon the "equity premium." This is the increased return that investors can get for investing in risky securities such as stocks as opposed to risk-free securities such as Treasury bonds.
Another way to look at the relationship between the value of "Main Street" (direct ownership of real estate) and the value of Wall Street (securitized real estate) is to compare their yields with risk-free securities. "Over a 15-year period, REIT spreads versus 10-year Treasuries have almost always been lower than the spreads on investment properties," Morrill said.
In addition to local risk-free securities, Cho et al.
To a query, he said that in testing times, relentless borrowings by the government have been a blessing for commercial banks, providing a convenient option to place bulk of their funds in risk-free securities.