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How and Why Interest Rates Affect Futures
There are at least four factors that affect change in futures prices, including risk free-interest rates, particularly in a no-arbitrage environment.
Required Rate of Return (RRR): Definition and Examples
The required rate of return (RRR) is the minimum return an investor will accept for an investment as compensation for a given level of risk.
Risk Premiums: Like Hazard Pay for Your Investments
A risk premium is the return in excess of the risk-free rate of return that an investment is expected to yield.
How to Calculate the Equity Risk Premium in Excel
It is fairly straightforward to calculate the equity risk premium for a security using Microsoft Excel; you can even find out how to estimate the expected return.
Market Risk Premium Definition
Market risk premium is the difference between the expected return on a market portfolio and the risk-free rate.
Risk Measurement: Types of Risk and Ways to Measure Them
Learn about common metrics used in risk measurement and how to use risk management techniques to assess the risk associated with an investment.
Risk Discount Definition
A risk discount refers to a situation where an investor is willing to accept a lower expected return in exchange for lower risk or volatility.
Forward Contracts: The Foundation of All Derivatives
An investor can assess interest rate parity and implement covered interest arbitrage by using a currency forward contract to generate risk-free returns.
Excess Returns Definition
Excess returns are returns achieved above and beyond the return of a proxy. Excess returns will depend on a designated investment return comparison for analysis.
A Quick Guide to the Risk-Adjusted Discount Rate
When a project or investment faces higher amounts of risk or uncertainty, it may be appropriate to utilize the risk-adjusted discount rate.