Risk-free asset
An asset whose future return is known today with certainty.
Similar financial terms
Risk-free rate
The rate earned on a riskless asset.
Risk-free asset
An investment with no chance of default, and a known or certain rate of return.
Roll-over relief ...
Risk-free asset
An asset whose future normal return is known today with certainty.
Risk-free rate ...
The risk-free asset is the (hypothetical) asset which pays a risk-free rate.
Using the risk-free asset, investors who hold the super-efficient portfolio may:
leverage their position by shorting the risk-free asset and investing the proceeds in additional holdings in the super-efficient portfolio, or ...
Riskless or risk-free asset
An asset whose future return is known today with certainty. The risk-free asset is commonly defined as short-term obligations of the US government.
Riskless rate ...
Capital allocation decisionAllocation of invested funds between risk-free assets and the risky portfolio.
portfolio choice can be separated into two independent tasks: 1) determination of the optimal risky portfolio, which is a purely mathematical problem, and 2) the personal choice of the best mix of the optimal risky portfolio and the risk-free asset ...
Risk premium The reward for holding the risky market portfolio rather than the risk-free asset. The spread between Treasury and non-Treasury bonds of comparable maturity.
To calculate a Sharpe ratio, divide an asset's excess returns (its return in excess of the return generated by risk-free assets such as Treasury bills) by the asset's standard deviation of returns.
By introducing a risk-free asset that could be bought and sold in a short period of time, (for instance, it is possible to grant and obtain loans at a certain rate), ...
Excess returns are generally defined as the returns provided by a given portfolio minus the returns provided by a risk-free asset. Excess returns are those in excess of the riskless asset.
The RATE OF RETURN earned on a risk-free ASSET. This is a crucial component of MODERN PORTFOLIO theory, which assumes the existence of both risky and risk-free assets.
The entire portfolio, including risky and risk-free assets.
Conversion factors
Rules set by the Chicago Board of Trade for determining the invoice price of each
acceptable deliverable Treasury issue against the Treasury Bond futures contract.
The line defined by every combination of the risk-free asset and the market portfolio. The line represents the risk premium you earn for taking on extra risk. Defined by the capital asset pricing model.
Capital Markets ...
A model for describing the way prices of individual assets are determined in an efficient market, based on their relative riskiness in comparison with the return on risk-free assets.
A line created in a graph of all possible combinations of risky and risk-free assets. Also known as the "reward-to-variability ratio".
4 Steps To Building A Profitable Portfolio
Achieving Optimal Asset Allocation
Capital Appreciation ...
COMPLETE PORTFOLIO - The entire portfolio, including risky and risk-free assets.
COMPLETED CONTRACT METHOD OF ACCOUNTING - is a method of revenue recognition for long-term contracts (i...
Capital market line (CML)
The line defined by every combination of the risk-free asset and the market portfolio. The line represents the risk premium you earn for taking on extra risk. Defined by the capital asset pricing model.
Allocation of invested funds between risk-free assets and the risky portfolio.
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Personal Finance Glossary ...
A portfolio constructed to represent the risk-free asset, that is, having a beta of zero.
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Those accepting demand deposits would be obliged to match their liquid liabilities with liquid risk-free assets-in the extreme case, a 100% cash reserve or shariah-compliant risk-free liquidity papers issued by governments and central banks.
This application studies the case with one risky asset and one risk-free asset. The goal is to provide intuitive answers to three questions.
The capital asset price model (CAPM) is a formalized description of the relationship between the efficient market price of a security, its risk, and the expected rate of return on that security. The model assumes that there is a risk-free asset in ...
Hedge Portfolio - The country-specific hedge portfolio in the International Asset Pricing Model serves as a store of value (like the risk-free asset in the CAPM) as well as a hedge against the currency risk of the market portfolio.
An equation relating an asset's relative riskiness (beta) to its required return. An element of modern portfolio theory. A mathematical model showing an "appropriate" price, based on relative risk combined with the return on risk-free assets.
Because many commodity ETFs use leverage through the purchase of derivative contracts, they may have large portions of uninvested cash, which is used to purchase Treasury securities or other nearly risk-free assets.
Zero-beta portfolio A portfolio constructed to have zero systematic risk, similar to the risk-free asset, that is, having a beta of zero.
Two-fund separation theorem The theoretical result that all investors will hold a combination of the risk-free asset and the market portfolio.
 See also: Expected return, Market portfolio, Expense, Banks, Optimal
  
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