The Price of Risk: With Equity Risk Premiums, Caveat Emptor!
Musings on Markets
AUGUST 5, 2023
In short, the expected return on a risky investment can be constructed as the sum of the returns you can expect on a guaranteed investment, i.e., a riskfree rate, and a risk premium, which will scale up as risk increases. The risk premium that you demand has different names in different markets.
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