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.

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.
References in periodicals archive ?
They will find it difficult to get loans as banks prefer riskless investments in government securities in a high-interest rate environment.
Practitioners have a choice of using either an historical estimate of the premium earned by equities over riskless investments, or somehow looking forward to estimate this differential.
Regulations set minimum requirements for cash to be set aside for safe, riskless investments; but the bank still faces some market risk.
There is a positive relationship between four of these variables and the call option's value, ceteris paribus: the underlying stock's price, the interest rate on riskless investments, the option's time to expiration (or maturity), and the volatility of the underlying stock's price.
"By eliminating targeted tax incentives for savings and investment, that act eliminated distinctions on income from risk and riskless investments." The SIA also points out the various ways other industrialized countries support individual investment in stocks.
The market risk premium measures the extra return that would be demanded by investors for shifting their money from a riskless investment to an averagerisk investment.