The line on a graph that shows the relationship between risk as measured by beta and the required rate of return for individual securities.

A product of the capital asset pricing model, the security market line plots the minimum acceptable return for an investment based on its level of market risk.

In the CAPM, the relation between required return and systematic risk (or beta): Rj - RF + bj (E[RM] - RF).

In Modern Portfolio Theory, the Security Market Line (SML) is the graphical representation of the Capital Asset Pricing Model. It displays the expected rate of return for an overall market as a fuction of systematic (non-diversifiable) risk (beta).