risk premium
Extra for uncertainty
The risk premium is the extra return an investor expects for taking on risk rather than choosing a safe option.
It's the gap between what a risky investment should yield and what a guaranteed one pays: Treasury bonds set the floor; stocks command a risk premium above that.
The concept applies beyond finance—any compensation for accepting uncertainty rather than safety.
Quantified chance of occurrence
- variabilityTendency to change
- contingencyUncertain possible event
- unpredictabilityState resisting forecasts
- volatilityRapid, unpredictable changeability
fluctuation · variance · standard deviation · confidence interval
Minimum required return percentage
- discount rateInterest on Fed loans
- betaGreek alphabet's second letter
- expected returnPredicted profit from investment
- compensationPayment for services rendered
Of risk calculation
- underwritingRisk evaluation and acceptance
- policyholderOwner of insurance contract
- coverageExtent of inclusion
- deductibleOut-of-pocket threshold amount
claims · liability · reinsurance · indemnity · insurer · morbidity · adverse selection · moral hazard
probability
Quantified chance of occurrence
- variabilityTendency to change
- contingencyUncertain possible event
- unpredictabilityState resisting forecasts
volatility · fluctuation · variance · standard deviation · confidence interval
hurdle rate
Minimum required return percentage
- discount rateInterest on Fed loans
- betaGreek alphabet's second letter
- expected returnPredicted profit from investment
actuarial
Of risk calculation
- underwritingRisk evaluation and acceptance
- policyholderOwner of insurance contract
- coverageExtent of inclusion
deductible · claims · liability · reinsurance · indemnity · insurer · morbidity · adverse selection · moral hazard
derivatives
Things derived from another
- investingstocks, stock, bonds, investing, investor
- riskdownside, product liability, threat assessment, peril, hazard
- credit riskcredit score, credit rating, creditworthiness, loan default, credit analysis
- bondsbond, corporate bond, corporate bonds, government bond, municipal bond
- Yieldharvest, bounty, crop yield, bumper crop, abundance
- interest ratesinterest rates, prime rate, interest, base rate, interest charge