Certainty Equivalent

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Dictionary Says

Definition of 'Certainty Equivalent'

A guaranteed return that someone would accept, rather than taking a chance on a higher, but uncertain, return. If you've ever thought about leaving your job to start your own business, and potentially make more money, but decided to stay and continue drawing a salary instead, then the amount of your salary is your certainty equivalent. You might need to come up with a business idea with a higher potential payoff to be convinced to leave the security of your existing job.
Investopedia Says

Investopedia explains 'Certainty Equivalent'

Investments must pay a risk premium to compensate investors for the possibility that they may not get their money back. If an investor has a choice between a U.S. government bond paying 3% interest and a corporate bond paying 8% interest, and he chooses the government bond, the payoff is the certainty equivalent. The company would need to offer this particular investor a potential return of more than 8% on its bonds, to convince him to buy. Thus, a company seeking investors can use the certainty equivalent as a basis for determining how much more it needs to pay, to convince investors to consider the riskier option. The certainty equivalent will vary, because each investor has a unique risk tolerance.
Search results for

'Certainty Equivalent'

  • New Rules, Same Reserves

    http://stocks.investopedia.com/stock-analysis/2010/New-Rules-Same-Reserves-CRK-HK-DVN-MRO0203.aspx
    ... proved reserves if, "reliable technology exists that establishes reasonable certainty
    of economic ... crude oil, which converts to 726 billion cubic feet equivalent ...

  • Natural Gas Industry: An Investment Guide

    http://www.investopedia.com/articles/stocks/10/investing-in-natural-gas-guide.asp
    ... that geological and engineering data demonstrate with reasonable certainty are
    recoverable ... as an investor understands that this is not the equivalent of free ...

  • 5 Of The World's Oldest Companies - Investopedia.com

    http://financialedge.investopedia.com/financial-edge/0711/5-Of-The-Worlds-Oldest-Companies.aspx
    ... We cannot always say with absolute certainty whether the companies are really old ...
    more than $50 million - a staggering sum in those days, the equivalent to more ...

  • US Oil Production Increases - A Blip Or A New Trend?

    http://stocks.investopedia.com/stock-analysis/2009/U.S.-Oil-Production-Increases---A-Blip-Or-A-New-Trend-CVX-MUR-EOG-HES-WLL-CLR-MRO1123.aspx
    ... love to say, it is an inconvenient fact that contradicts the certainty that this ...
    Current production is 37,000 barrels oil equivalent (BOE) per day, with three ...

  • New Reserve Rules Expand PUDs

    http://stocks.investopedia.com/stock-analysis/2010/New-Reserve-Rules-Expand-PUDs-UPL-HK-KWK-SWN0222.aspx
    ... location "where reliable technology exists that establishes reasonable certainty
    of economic ... locations total 768 billions of cubic feet equivalent and will be ...

  • World's Most Expensive Disasters - Investopedia.com

    http://financialedge.investopedia.com/financial-edge/0811/Worlds-Most-Expensive-Disasters.aspx
    ... now be reasonably estimated, the total cost will never be known with certainty. ... Survey
    estimated the energy released by the quake to be equivalent to 23,000 ...

  • August's Best And Worst Stocks

    http://stocks.investopedia.com/stock-analysis/2010/Augusts-Best-And-Worst-Stocks-COCO-POT-MOS-ESI0901.aspx
    ... anyway, which in many cases differs from the school's equivalent internal calculation. ...
    faded, and why they may well struggle until certainty materializes again ...

  • How To Convert Value At Risk To Different Time Periods

    http://www.investopedia.com/articles/04/101304.asp
    ... convert one value at risk (VAR) of one time period into the equivalent VAR for ... Rather
    than produce a single statistic or express absolute certainty, it makes a ...

  • Financial Statements: Who's In Charge? | Investopedia

    http://www.investopedia.com/university/financialstatements/financialstatements1.asp
    ... That is, we can know with objective certainty how much was paid to acquire
    property. ... But in a single year, they are not equivalent. ...

  • Subprime Is Often Subpar

    http://www.investopedia.com/articles/pf/07/subprime.asp
    ... They are the equivalent in the subprime mortgage market to what is commonly known ...
    While no one can predict with certainty the future direction of interest rates ...

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