Risk premium意思
"Risk premium" is a term used in finance and economics to describe the additional return that an investor requires for holding a riskier asset rather than a risk-free asset. The risk premium compensates the investor for the additional risk taken.
There are different types of risk premiums depending on the context:
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Market Risk Premium: This is the additional return that the market as a whole requires for holding a diversified portfolio of stocks instead of risk-free assets. It reflects the average level of risk in the stock market.
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Credit Risk Premium (CRP) or Default Risk Premium: This is the additional return that investors require for holding a corporate bond instead of a government bond of similar maturity. It reflects the risk of default by the borrower.
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Specific Risk Premium: This is the additional return that an investor requires for holding a particular stock or bond that has risks not shared by the market as a whole.
The risk premium is typically calculated as the difference between the expected return on an asset and the risk-free rate. The risk-free rate is usually represented by the return on short-term government bonds, which are considered to have no default risk. The size of the risk premium depends on the perceived level of risk and the investor's risk tolerance.