riskless investment

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 ?
A put option is, in effect, an insurance policy whose cost depends upon the "strike price" at which the insurance policy kicks in, the risk of the assets being insured, and the rate of return available on riskless investment.
The pension fund has a riskless investment opportunity i = 0 and risky opportunities i = 1, .
Risk adjusted rates of return are estimated to be less than 100 basis points above the risk-free rate for all NCREIF return series except the Pacific Northwest, which is 150 basis points above the benchmark riskless investment.
The closest thing to a riskless investment is a Treasury bill, which can be held to maturity.
In the investment world, proposing a riskless investment with high rewards is tantamount to selling a perpetual motion machine or a pill that turns water into gasoline.
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.
One of the most interesting sections in the book is the discussion of equity risk and the equity risk premium, that is, the historical reward investors have enjoyed for bearing the greater volatility risk of equity investment relative to an investment in Treasury bills, a riskless investment.
Abel, NBER and University of Pennsylvania, "The Social Security Trust Fund, the Riskless Investment Rate, and Capital Accumulation" (NBER Working Paper No.
No investment advisor would advise an award recipient to place a lump sum in a riskless investment of any sort, and certainly not a specialty security like TIIS bonds.
f] = continuously compounded return on a riskless investment with a maturity of t.
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.
By eliminating targeted tax incentives for savings and investment, that act eliminated distinctions on income from risk and riskless investments.