Definitions for

**"Risk premium"****Related Terms:**Equity risk premium, Investment risk, Risk-free rate of return, Systematic risk, Capital asset pricing model, Risk-free asset, Risk averse, Inflation risk, Raroc, Reinvestment risk, Effective yield, Risk-adjusted return, Risk-averse, Specific risk, Purchasing power risk, Risk-free rate, Risk adjusted return on capital, Capital market line, Income risk, Capm, Required rate of return, Excess return, Nondiversifiable risk, Unsystematic risk, Hurdle rate, Risk tolerance, Risk-based capital, Yield, Capital risk, Rate of return, Returns, Guaranteed funds, Risk adjusted return, Interest, Market risk, Cost of capital, Expected return, Growth assets, Diversifiable risk, Financial risk, Redemption yield, Return, Leverage, Exposure, Ladder , Yield to maturity, Optimal portfolio, Absolute return, Turnover rate

Reward the investors ask for taking a larger investment risk.

The excess return on the risky asset that is the difference between expected return on risky assets and the return of risk-free assets.

The additional compensation demanded by investors, above the risk-free rate of return, for assuming risk -- the larger the risk, the larger the risk premium.

The additional return that investors require to hold an asset whose perceived return is riskier than that of a hypothetically safe asset. The risk can arise from many sources--such as the possibility of default (in the case of corporate or municipal debt) or the volatility of earnings (in the case of corporate equities).

A higher yield offered by bonds and similar investments that carry a high risk rating. For example, government bonds are considered the safest bond investments, and pay among the lowest yields. Corporate bonds, on the other hand, must offer higher yields to attract investors because those bonds carry a higher risk than government bonds.

The premium associated with the additional risks of a particular investment.

The higher expected return (in the sense of mathematical expected value) that an uncertain asset must pay in order for risk averse investors to be willing to hold it. The difference between the interest rate on a risky asset and that on a safe one. In exchange markets the difference between the forward rate and the expected future spot rate.

The demand for higher rates of return in exchange for bearing more risk.

the additional interest required by lenders as compensation for the risk that a borrower may default; more generally, the extra return required to compensate an investor for bearing risk

The difference between the rate of return on a security (or a market or an investment) and the risk free rate of return.... more on: Risk premium

The reward for holding a risky investment rather than a risk-free one. see also equity risk premium, premium, Capital Asset Pricing Model.

Discount rates used for risk assets, such as equities, are higher than those used for risk-free assets, such as Treasuries or gilts. Equity risk premium is the difference. Samurai bond Bond issued by a foreign borrower in Japan; denominated in yen, it can be bought by non-residents of Japan.

a rate of return in addition to a risk-free rate to compensate the investor for accepting risk.

the expected excess return to the benchmark

The difference between the return available on a risk-free asset and the return available on a riskier asset.

The extra return over a risk-free rate of return that investors require to compensate them for holding an asset with a certain degree of risk.

The adjustment of a lenderâs base interest rate in response to the anticipated level of a borrowerâs credit risk in a loan transaction. Higher risk loans may carry higher interest rates, with the rate differential representing the risk premium.

A risk premium is one way to measure the risk you'd take in buying a specific investment. In the U.S., some analysts define risk premium as the difference between the current risk-free return — defined as the yield on a 13-week U.S. Treasury bill — and the total return on the investment you're considering. Other measures of risk premium, which are applied specifically to stocks, are a stock's beta, or the volatility of that stock in relation to the stock market as a whole, and a stock's alpha, which is based on an evaluation of the stock's intrinsic value. Similarly, the higher interest rates that bond issuers typically offer on riskier bonds may be considered a risk premium, since the higher rate, and potentially greater return, is a way to compensate for the greater risk.

Difference between the return on a risk-free investment and an investment involving a certain risk exposure. Compensation for investors for accepting additional, undiversifiable market risks (market risk premium). Investors who hold bonds, for example, would only be willing to switch these for riskier equities if they were to receive an appropriate risk premium.

The amount of money that a risk-averse person would pay to avoid taking a risk. The size of the risk premium depends on the magnitude and probability of the alternatives that the person faces. A person who is risk averse prefers a certain outcome to an uncertain outcome with the same expected value.

The additional return over the risk free rate required to compensate an investor for the risk of owning that asset. For example, the long term average risk premium for equities is often estimated to be in the region of four percentage points over the interest rate on long term government bonds.

The reward for holding a security rather than a risk-free asset. Generally, the higher risk a security has the greater potential reward it will offer to compensate investors for the additional risk.

Additional sum payable or return to compensate a party for adopting a particular risk.

The extra yield of an investment over the 'risk-free' rate, demanded by investors to compensate them for taking the higher risk.

The term 'risk premium' refers to the difference between the return attached to investments with different levels of risk. Given the basic principle of risk and return in financial markets - the higher the risk the higher the return required to compensate for that risk - the return offered by an investment should increase with the level of risk attached to that investment. The extra return offered by higher risk investments is the risk premium.

The increased return on a security required to compensate investors for the risk borne.

A rate of return added to a risk-free rate to reflect risk.

The excess return over a risk-free asset (eg a gilt) which investors will require to compensate themselves himself for the higher risk associated with holding an asset like an equity.

The risk premium is the additional return an investor requires to compensate for the risk borne.

Reward for holding risky market portfolio over risk less assets.

(Prime de risque) Additional compensation demanded by an investor, over and above the risk-free rate, for the risk incurred by investing his or her capital. The higher the risk, the greater the 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.

Expected additional return for making a risky investment rather than a safe one.

Premium after removing acquisition expenses to reimburse claims. See Net Net Premium.

The extra return over the risk-free rate expected by investors to compensate them for holding an asset with a certain degree of volatility. This is a crucial element in programming a long-term asset mix.

The incremental return that an investor expects in exchange for assuming an additional amount of risk.

the higher return you might expect to make for taking on some form of risk

The extra yield over the risk free rate demanded by investors to compensate them for holding a riskier asset.

The increase in required rate of return over and above the nominal risk-free interest rate is risk premium.

A risk premium is the minimum difference between the expected value of an uncertain bet that a person is willing to take and the certain value that he is indifferent to.

a payment that factors-in the inherent risk of a trade.