risk-free return

(redirected from Riskless Return)

Risk-Free Return

The return on any investment with such low risk that the risk is considered to not exist. A common example of a risk-free return is the return on a U.S. Treasury security. The risk-free return exists in order to compensate the investor for the temporary tying up of his/her capital, even though it is not put at risk. See also: Capital Allocation Line, riskless investment.

risk-free return

The annualized rate of return on a riskless investment. This is the rate against which other returns are measured. See also excess return.

Risk-free return.

When you buy a US Treasury bill that matures in 13 weeks, you're making a risk-free investment in the sense that there's virtually no chance of losing your principal (since the bill is backed by the US government) and no threat from inflation (since the term is so short).

Your yield, or the amount you earn on that investment, is described as risk-free return. By subtracting the risk-free return from the return on an investment that has the potential to lose value, you can figure out the risk premium, which is one measure of the risk of choosing an investment other than the 13-week bill.

References in periodicals archive ?
3 in the past three years when adjusted for price swings, the top gain among 72 markets worldwide according to the Bloomberg Riskless Return Ranking.
LAN Airlines, TAM, Aberdeen Asset Management LAN Safest Airline Stock Again After TAM Buy: Riskless Return.
3 percent in the first quarter this year when adjusting for volatility, the best among 32 major airlines, according to the BLOOMBERG RISKLESS RETURN RANKING.
Bloomberg has place South Korea-based Kia Motors Corporation (KSE: 000270), at the top of its Riskless Return Ranking.
Comparison of investment opportunity and call option Real options Financial options Investment opportunity Variable Call option Current value of cash flows S Current stock price Investment expenditure X Exercise stock price Possible time of decision to T-t Time to expiration defer date Time value of money R Riskless return rate Uncertainty of future cash [[sigma].
They must provide minimum fixed returns to their clients while trying to obtain a better performance than a riskless return, by trading on financial markets.
Because this payoff is riskless, the portfolio of a short call option and 1/2 share of the stock must earn the riskless return.
An uninformed buyer can assure himself of a riskless return of [alpha/2] per share by buying the market portfolio made up of an equal fraction of the firms in the two sectors.
Aside from purchasing trees, agents can always store coconuts to earn a riskless return f.
geometric averaging of market and riskless returns will make a difference.
Economists have long appreciated that employees should logically and rationally prefer a DC pension plan that allows them to make investment decisions to one that forces them to earn riskless returns on riskless investments.