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	Risk-Free Rate Of Return
		The theoretical rate of return of an investment with zero risk.
		In theory, the risk-free rate is the minimum return an investor expects for any investment since he or she would not bear any risk unless the potential rate of return is greater than the risk-free rate.
		Thus, the interest rate on a three-month U.S. Treasury bill is often used as the risk-free rate.
	www.investopedia.com /terms/r/risk-freerate.asp (314 words)

	Risk-free interest rate - Wikipedia, the free encyclopedia
		The risk-free interest rate is the interest rate that it is assumed can be obtained by investing in financial instruments with no risk.
		Since this interest rate can be obtained with no risk, it is implied that any additional risk taken by an investor should be rewarded with an interest rate higher than the risk-free rate (or with preferential tax treatment; some local government US bonds give below the risk free rate).
		The risk-free interest rate is thus of significant importance to modern portfolio theory in general, and is an important assumption for rational pricing.
	en.wikipedia.org /wiki/Risk-free_interest_rate (191 words)

	Risk premium - Wikipedia, the free encyclopedia
		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.
		However, most people are risk averse and would prefer the $500 for sure.
		The risk premium for equities is also called the equity premium.
	en.wikipedia.org /wiki/Risk_premium (339 words)

	The "Risk Free" Rate
		It is a commonplace that during times of turmoil, interest rates rise; economic historian Richard Sylla has said that a plot of rates over time is a sort of national "fever chart." This is true, in fact, of all rates of return-the "risk-free" rate, the interest rates of less-secure investments and, of course, equity returns.
		In recent years, in the developed nations, short-term rates have almost always been lower than long-term rates, since investors need to be rewarded for the higher interest-rate risk of bonds, due to the risk of serious damage from inflation.
		Most recently, this relationship of return vs. perceived risk was validated by Campbell Harvey and his colleagues at Duke, who found that stock market returns correlate quite nicely with the degree of perceived economic risk.
	www.indexfunds.com /articles/20011108_Riskfree_adv_md_WB.htm (2008 words)

	Bloomberg.com: Financial Glossary
		Ratings can also be an evaluation a country's creditworthiness or ability to repay, taking into consideration its estimated percentage default rate and political risk.
		The risk that proceeds received in the future may have to be reinvested at a lower potential interest rate.
		The interest rate on the loan is generally fixed during the term of the note, but when the balloon comes due, the lender may refinance it at a higher rate.
	www.bloomberg.com /analysis/glossary/bfglosr.htm (6817 words)

	Glossary: Risk-Free Rate (Site not responding. Last check: 2007-10-18)
		The notion is used extensively in option pricing theory where derivatives are valued with a risk neutral assumption under which all assets may be assumed to have expected returns equal to the risk-free rate.
		The notion of a risk-free rate is also used in Modern Portfolio Theory.
		In practice, the risk-free rate is often assumed to be a short-term Treasury rate.
	www.riskglossary.com /articles_old/glossaryriskfreerate.htm (80 words)

	Risk-Free Rate of Return
		In theory, the risk-free rate is the minimum return an investor expects for any investment since he or she would not bear any risk unless the potential rate of return is greater than the risk-free rate.
		Thus, the interest rate on a three-month U.S. Treasury bill is often used as the risk free rate.
		Risk and Diversification - Basic introduction into what risk is, the different kinds and why investors should be aware of risk.
	baystreet.investopedia.com /terms/r/risk-freerate.asp (151 words)

	Risk-free interest rate -- Facts, Info, and Encyclopedia article (Site not responding. Last check: 2007-10-18)
		Since this interest rate can be obtained with no risk, it is implied that any additional risk taken by an investor should be rewarded with an interest rate higher than the risk-free rate.
		The risk-free interest rate is thus of significant importance to (Click link for more info and facts about Modern portfolio theory) Modern portfolio theory in general, and is an important assumption for (Click link for more info and facts about Rational pricing) Rational pricing.
		It is also a required input in financial calculations, such as the (Click link for more info and facts about Black-Scholes) Black-Scholes formula for pricing (The right to buy or sell a stock at a specified price within a stated period) stock options.
	www.absoluteastronomy.com /encyclopedia/r/ri/risk-free_interest_rate.htm (129 words)

	Campbell R. Harvey's Hypertextual Finance Glossary
		The rate at which an investor assumes interest payments made on a debt security can be reinvested over the life of that security.
		Bonds that allow the initial interest rates to be adjusted on specific dates in order that the bonds trade at the value they had when they were issued.
		A type of mortgage pipeline risk that occurs when a lender commits to sell loans to an investor at rates prevailing at the time of mortgage application but sets the note rates when the borrowers closes.
	www.duke.edu /~charvey/Classes/wpg/bfglosr.htm (8527 words)

	Risk-free rate
		The risk free rate of return is the best rate that does not involve taking a risk - i.e.
		The risk free rate for a given period is taken to be the rate on government bonds over the period.
		The risk free rate is used by the CAPM.
	investmentideas.co.uk /whatis/risk-free-rate (109 words)

	Session Two: Portfolio Theory
		The rate of return that investors demand to compensate for these three components is known as the investor's required rate of return.
		The risk-free rate of return rewards the investor for delaying consumption (time the funds are committed) and the expected rate of inflation.
		Risk is the uncertainty involved with receiving a rate of return that is different than the expected rate of return.
	www2.una.edu /kvrensselaer/Class2.html (1651 words)

	The Financial Environment Interactive Quiz
		The real risk-free rate of interest, k*, is 2.7 percent and is assumed to be constant.
		The default risk and liquidity premiums for this company’s bonds total 0.9 percent and are believed to be the same for all bonds issued by this company.
		The inflation rate is expected to be 4 percent a year for the next three years and then 5 percent a year thereafter.
	quizit.swcollege.com /quizit/z_quiz.jsp?quiz_id=379 (355 words)

	Risk-free Rate (Site not responding. Last check: 2007-10-18)
		(2) The rate of return available on an investment considered to be essentially without risk.
		The available rate paid on US Treasury bills, for instance, is typically used as the risk free rate.
		The rate is considered to be without risk in the sense it is backed by the full faith and credit of the US Government.
	www.russell.com /us/glossary/analytics/risk_free_rate.htm (71 words)

	Risk-free interest rate article - Risk-free interest rate interest rate investing risk United States Government bonds - ... (Site not responding. Last check: 2007-10-18)
		They are considered to be risk-free because the likelihood of the Government defaulting is extremely low, and because the short maturity of the bill protects the investor from interest-rate risk that is present in all fixed-rate bonds.
		Risk-free interest rate article - Risk-free interest rate definition - what means Risk-free interest rate
		All text is available under the terms of the GNU Free Documentation License.
	www.what-means.com /encyclopedia/Risk_free_interest_rate (207 words)

	SCMP.com - Glossary of Financial and Business Terms (Site not responding. Last check: 2007-10-18)
		The risk that proceeds received in the future will have to be reinvested at a lower potential interest rate.
		Bonds which allow the initial interest rates to be adjusted on specific dates in order that the bonds trade at the value they had when they were issued.
		The risk free asset is commonly defined as short-term obligations of the U.S. government.
	special.scmp.com /glossary/bfglosr.html (7574 words)

	Risk Free Rate in Scenario Generator (Site not responding. Last check: 2007-10-18)
		This is where you enter the risk free rate to be used in generating scenarios.
		The risk free rate is a theoretical interest rate at which an investment may earn interest without incurring any risk (i.e.
		Since interest rates implied by government treasury bills and bonds are generally accepted as "default-free", they can be treated as risk free.
	www.ggy.com /htmlhelp/axis/30314.htm (196 words)

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	[No title]
		Between M and Z, we are borrowing at the risk free rate.
		The slope of the SML reflects the degree of risk aversion in the economy.
		The risk that remains after diversification is market risk, and this risk can be measured by the degree to which a given stock tends to move in relation to the market.
	www.ndsu.nodak.edu /instruct/swandal/AGEC346s/afcapmh.htm (772 words)

	FRB: H.15--Selected Interest Rates, Web-Only Daily Update--October 21, 2005
		The daily effective federal funds rate is a weighted average of rates on brokered trades.
		The rate reported is that for the Federal Reserve Bank of New York.
		Rates are for a Fixed Rate Payer in return for receiving three month LIBOR, and are based on rates collected at 11:00 a.m.
	www.federalreserve.gov /releases/H15/update (620 words)

	On the Relationship Betweem the Market Risk Premium and the Risk-Free Interest Rate
		The lack of integratedness between the risk premium and the risk free rate has implications on the construction of the equity risk premium used in the determination of the required rate of return.
		Their results suggest that for the period 1968-1995, the equity risk premium was in the region of 5 percent, a number that is significantly lower than the average realized equity risk premium.
		In contrast, all the measures of the market risk premium are stationary in their levels at the 5 percent level of significance with the exception of Spone, which is linear trend stationary at the 10 percent level.
	www.westga.edu /~bquest/2004/relationship.htm (2930 words)

	The Equity Premium and the Risk Free Rate (Site not responding. Last check: 2007-10-18)
		This paper investigates the ability of a representative agent model with time separable utility to explain the mean vector and the covariance matrix of the risk-free interest rate and the return to equity.
		We generalize the standard calibration methodology by accounting for the uncertainty in both the sample moments to be explained and the estimated parameters to which the model is calibrated, and then develop a testing framework to evaluate the model's ability to match the moments of the data.
		We study a model in which dividends explicitly represent the flow that accrues to the owner of the equity, and they are discounted by the intertemporal marginal rate of substitution defined over consumption.
	people.brandeis.edu /~cecchett/equity.htm (193 words)

	RISK PREMIUM AND THE RISK-FREE RATE (Site not responding. Last check: 2007-10-18)
		U.S. Treasury bills carry so little risk they are said to be risk-free investments; therefore we can use the rate of return on T-bills to approximate the risk-free rate.
		Equity risk, small stock risk, bond default risk, and bond horizon risk all have premiums which reward investors with larger average returns for taking such risks.
		Without a higher rate of return, there would be no incentive for investors to put their money into riskier investments.
	www.precision-info.com /newtut/data/-752048102.html (446 words)

	Sharpe, Treynor, Jensen
		This ratio measures the return earned in excess of the risk free rate (normally Treasury instruments) on a portfolio to the portfolio's total risk as measured by the standard deviation in its returns over the measurement period.
		The absolute risk adjusted return is the Treynor plus the risk free rate.
		Alphas are found in many rating services but are not always developed the same way- so you can't compare an alpha from one service to another.
	www.efmoody.com /investments/sharperatio.html (599 words)

	Risk-free rate (Site not responding. Last check: 2007-10-18)
		I always though that the rfr is instantenous.
		The problem I'm having is that although I have read that the risk-free rate has to be equivalent to the t-bill or zero rate at the option expiration date, the Black-Scholes model talks about a generic interest-rate, r, rather than a rate that is time-dependent (there's usually no subsript, t, attached to the rfr).
		Could it be that while Black-Scholes uses a fixed rfr, the Merton model will use a stochastic rate (the zero rate with a maturity equivalent to the option expiration) and in practice the Merton model is used (without making the volatility stochastic)?
	www.contingencyanalysis.com /archive/archive01-1/00000b85.htm (132 words)

	Rho
		is one of the Greek factor sensitivities used by traders to measure market risk exposures in derivatives portfolios.
		It measures a portfolio's linear exposure to changes in the risk-free interest rate.
		For most portfolios, sensitivity to the risk-free rate is minor compared to possible sensitivities to underliers or implied volatilities.
	www.riskglossary.com /articles/rho.htm (297 words)

	Risk-Free Rate
		Modern portfolio theory postulates the existence of at least one risky asset and one risk-free asset, usually taken to be Treasury bills or comparable short-term sovereign debt.
		The risk-free rate is the rate of return on the risk-free asset.
		This risk-free rate is lower than the expected return on the risky asset, because any issuer will have to offer a risk-averse investor the expectation of a higher return to induce him to abandon the risk-free asset for an investment with uncertain returns or, say, credit risk.
	riskinstitute.ch /00012705.htm (86 words)

	Research Projects at RiskLab
		Attempts to quantify liquidity risk have focused both on the price impact of the execution of trades for a given portfolio (endogenous liquidity) and on portfolio-independent liquidity measures that reflect market behavior such as market spread (exogenous illiquidity).
		The introduction of the regulatory constraints as an additional rationale for risk management, as well as the analysis of how the investment, hedging, and capital budgeting decisions of financial firms are influenced by such an introduction.
		Efforts are underway to link credit and market risk within a common modelling framework (such as models for the short interest rate that also take into account credit effects) but these concepts have not been well established for risk** management yet.
	www.risklab.ch /Projects.html (4468 words)

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