What is Risk Premia?
Risk Premia The return in excess of the risk-free rate that investors demand for holding risky assets. Examples include equity, credit, volatility, and liquidity risk premia.
Source: CFA Institute, IFRS Foundation, FASB (GAAP), Basel III Framework
How is “Risk Premia” Used in Practice?
Allocating to different risk premia allows portfolio managers to diversify sources of return and manage factor exposures.
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Who Needs to Know This Term?
- Financial Analysts
- Bankers
- Traders
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What is Risk Premia?
The return in excess of the risk-free rate that investors demand for holding risky assets. Examples include equity, credit, volatility, and liquidity risk premia.
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