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| | Risk premium - Wikipedia, the free encyclopedia |
 | | The risk premium for equities is also called the equity premium. | | | The return from equity is the dividend yield and capital gains. | | | Debt: In terms of bonds it usually refers to the credit spread (the difference between the bond interest rate and the risk-free rate). |
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http://en.wikipedia.org/wiki/Risk_premium
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| | Utility Cost Of Equity - Risk Premium |
| | The simple risk premium calculates an equity premium for each quarter or each year over the utility cost of debt for a 5 to 10 year historical period, using the DCF method for equity cost each period. | | | One problem with this approach is that it is rather circular, in that the DCF calculation of cost of equity is used to calculate the premium, which in tern is used to calculate the cost of equity. | | | The risk premium method is based on the premise that the premium that an investor expects to earn for an equity investment is fairly constant over time. |
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http://www.geocities.com/WallStreet/Market/1839/riskprem.html
(427 words)
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| | FPA Journal - The Vanishing Equity Risk Premium |
| | The spread in the expected return between equities and bonds is often referred to as the equity risk premium. | | | For today’s equity risk premium to match the historical spread in stock and bond returns, the expectations of future corporate profit growth must far exceed the historical growth rates in corporate profits. | | | If investors required a higher risk premium in 1926 than in 1999, then the actual equity returns earned during the period will overstate the expected equity risk premium at the end of the period if earnings growth expectations have not increased commensurately. |
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http://www.fpanet.org/journal/articles/1999_Issues/jfp0599-art6.cfm
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| | The term risk premium has come to have different meanings in different contexts |
| | Since the credit risk is borne mostly by the shareholders, the return on their risk capital amounts to a risk (insurance) premium paid by the commercial lending line of business. | | | The UTR risk premium as defined in (1) is the difference between the NPV the lender expects to realize by holding the credit instrument for its cash flows and the price he would obtain by selling the instrument at its (arbitrage determined) fair market value. | | | This follows from a combination of (i) the fact that the UDL risk premium on the loan is the same as the UTR risk premium on the default put and (ii) the applicability of risk premium additivity. |
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http://www.mathfinance.wagner.com/PAPERS/P5/Risk1_Final.html
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| | Wiley::The Equity Risk Premium: The Long-Run Future of the Stock Market |
| | In his invaluable summing up of the equity risk premium and the long-run outlook for common stocks, Cornell weighs the evidence and assays the impact of a lower equity risk premium in the future-and its profound implications for investments, corporate decision making, and retirement planning. | | | The Equity Risk Premium-the difference between the rate of return on common stock and the return on government securities-has been widely recognized as the key to forecasting future returns on the stock market. | | | In addition, the equity risk premium is an issue that regulatory bodies consider when they set fair rates of return for regulated companies. |
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http://www.wiley.com/WileyCDA/WileyTitle/productCd-0471327352.html
(678 words)
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| | Inferring the Forward Looking Equity Risk Premium from Derivative Prices |
| | This paper considers the measurement of the equity risk premium in financial markets from a new perspective that picks up on a suggestion from Merton (1980) to use implied volatility of options on a market portfolio as a direct ‘ex-ante’ estimate for market variance, and hence the risk premium. | | | Here the time variation of the unobserved risk premium is modelled by a system of stochastic differential equations connected by arbitrage arguments between the spot equity market, the index futures and options on index futures. | | | Comparisons with ex-post returns indicate that such historical measures may be understating the market risk premium. |
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http://www.bepress.com/snde/vol8/iss1/art3
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| | NCRB:: NCRB Assigned Risk Premium Calculator |
| | When the Minimum Premium is greater than the Calculated Premium, calculate the premium charge as the Minimum Premium minus the calculated premium for Employers Liability Increased Limits of Liability. | | | The procedure is to compare the minimum premium for the policy to the calculated premium at standard limits, which means that any premium generated by Increased Limits of Employers Liability needs to be subtracted out before the comparison is made. | | | To determine the premium generated by Increased Limits of Employers Liability you first add the calculated premium for Increased Limits to the premium generated by balancing to Employers increased limits. |
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http://www.ncrb.org/premcalc/CalcSupport.asp
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| | The Big Picture: Equity Risk Premium |
| | equity premium exists because equity financed institutions are more profitable than bond financed corporations. | | | The equity risk premium is something for economists to talk about, but is pretty much ignored by practitioners. | | | Some economists have suggested that the equity risk premium is reasonable, if you account for very rare but very costly events, like depressions and wars. |
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http://bigpicture.typepad.com/comments/2006/02/equity_risk_pre.html
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| | NBAA Finance & Tax > War Risk Insurance Update, June 2002 |
| | For example, if the premium component for the $100,000,000 liability coverage limit your company carriers is $30,000, your War Risk premium would be $30,000 x 20% = $6000. | | | The ICAO is continuing its efforts to establish a global scheme for aviation war risk insurance. | | | Have your broker quote the incremental premium difference with and without War Risk Liability and War Risk Hull coverage when presenting his or her proposal. |
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http://www.nbaa.org/ops/finance/insurance/warrisk200206.htm
(792 words)
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| | Minimum Risk Premium: The Knaepen Package |
| | Reflect risk, thereby ensuring that risk premium rates are not inadequate to cover long-term operating costs and losses. | | | Accordingly, the OECD Secretariat is not in a position to indicate the premium rate charged for any specific transaction; any transaction-specific enquiries should be directed to Participants' export credit agencies. | | | In practice, the actual premium rates charged by the Participants for specific transactions may be above the minimum rates required by the Arrangement. |
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http://www.oecd.org/document/10/0,2340,en_2649_201185_2668426_1_1_1_1,00.html
(326 words)
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| | InsWeb Insurance Glossary Life Insurance Terms |
| | It provides that the cash value of the policy be used as a single premium to purchase paid-up insurance in whatever amount the cash value will provide, which will be less than the original face amount in most cases. | | | A record of all policies charged to a debit account. | | | The automatic reestablishment of in-force status effected by the payment of another premium. |
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http://www.insweb.com/learningcenter/glossary/life-r.htm
(435 words)
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| | Shearwater Captial - Learning Center - The Equity Risk Premium |
| | The increase in expected return over the risk-free rate (i.e., the Treasury bond rate) is referred to as the risk premium. | | | During the latter 1990s, pundits theorized that the risk premium for stocks was getting smaller because there just wasn't that much risk anymore in the stock market. | | | If you are willing to assume the added risk of investing in stocks, you are entitled to a higher rate of return. |
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http://www.shearwatercapital.com/learning/riskpremium.html
(415 words)
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| | Economics: How Risky Is the Risk Premium? |
| | For long-range planning, the debate about the merits of stocks vs. Treasury bills or bonds boils down to what economists call the ''equity risk premium.'' This is a tricky and often misunderstood concept. | | | The two scholars at the American Enterprise Institute, a conservative think tank, say the equity risk premium is unjustified--i.e., stocks are too low--because in the long run, stocks aren't more volatile than bonds. | | | Wrestling with this puzzle, some people have concluded that the equity premium is a case of mass delusion--one that's about to end. |
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http://www.businessweek.com/2000/00_52/b3713061.htm
(984 words)
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| | EconLog, The Risk Premium, Arnold Kling: Library of Economics and Liberty |
| | Economists and others who try to calculate market risk premiums (or the margin of safety) often use these calculations to draw conclusions about whether or not the stock market is overvalued. | | | I am one of the few economists who does not like the concept of the risk premium, which is measured in the same dimension as yield. | | | A long-reigning fad in academic finance is the addition of two fallacious atheoretical risk factors: Size and Value, which allegedly have their own risk premia. |
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http://econlog.econlib.org/archives/2003/02/the_risk_premiu.html
(572 words)
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| | Definition Risk Premium |
| | Risk premium refers to the idea that the higher the risk, the higher the cost. | | | The difference of cost between a no risk investment and a high risk investment is the risk premium. | | | What will it cost for the extra risk? |
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http://www.chartfilter.com/glossary/r18.htm
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| | North American Actuarial Journal: EQUITY RISK PREMIUM: EXPECTATIONS GREAT AND SMALL |
| | The equity risk premium (ERP) is an essential building block of the market value of risk. | | | The ability of the valuation actuary to choose a sensible value for the ERP, whether as a required input to capital asset pricing model valuation, or any of its descendants, is as important as choosing risk-free rates and risk relatives (betas) to the ERP for the asset at hand. | | | Risky discount rates, asset allocation models, and project costs of capital are common actuarial uses of ERP as a benchmark rate. |
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http://findarticles.com/p/articles/mi_qa4030/is_200401/ai_n9365574
(424 words)
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| | Inflation Risk Premium |
| | The extra "risk premium" is for inflation changes. | | | Not only do lenders want to be compensated for the inflation they expect, they also want to be compensated for the risk that inflation could increase during the term of their loan. | | | Lenders want a return on their money which compensates them for the inflation they expect and the risk that their inflation expectation could be wrong. |
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http://www.finpipe.com/inflater.htm
(375 words)
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| | The Societal Risk Premium |
| | The tradeoff between the variability of bill payouts and the interest-rate risk of consols (and their modern reincarnation as long-term bonds) reverses during the 20th century. | | | 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. | | | The modern investor would predict that bills would carry a lower interest than consols, since bills were not exposed to interest rate (i.e., inflation) risk. |
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http://www.efficientfrontier.com/ef/901/society.htm
(2069 words)
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| | [No title] |
| | Generally only U.S. securities (specifically T-bills) are considered risk free [Rf] because the Federal government can raise taxes or borrow as necessary to avoid default. | | | The market risk is called systematic and the diversifiable risk is called unsystematic. | | | securities) The reward for bearing systematic risk, or the risk premium (asset rate in excess of the risk free rate) The amount of systematic risk in the market, or the Beta value ¡~ 6 G 6 & C + ó ê î9 ï 0 é ðá ` ð ðy ð( ð ð ðr ð S ð ¼A¶¿ ÿ ð ãð ð à ¶ ð ðÇ ð “ ð6 3’ ¿ ¿ À ÿ ð ° ða ¨Ý Most investments carry some degree of risk. |
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http://web.ovc.edu/advance/hamm/fin13.ppt
(225 words)
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| | CUNA |
| | The Risk Premium and the Risk-Free Rate - The relationship between risk and return is fundamental to investing. | | | After defining types of risk, the articles discuss risk premium and the risk-free rate. | | | The material here is meant to help you evaluate the risk levels of investments so that you can choose them according to your own risk tolerance. |
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http://www.creditunion.coop/tutorials/tl249242250.html
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| | References - The Market Equity Risk Premium - Treasury Paper - The Treasury |
| | Booth, Laurence (1999) "Estimating the equity risk premium and equity costs: New ways of looking at old data." Journal of Applied Corporate Finance 12(1): 100-112. | | | Harper, David (2003) "The equity risk premium." Investopedia.Com. | | | Pastor, Lubos and Robert Stambaugh (2001) "The equity premium and structural breaks." jof 56(4): 1207-1239. |
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http://www.treasury.govt.nz/merp/09.asp
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| | Of Risk and Myopia |
| | Thus, the expected equity risk premium is about 3.5%. | | | Until a short while ago, T-bills offered about a 3% real yield, but recent events have inflated the price of safety to the point where their real yield is zero. | | | Or has the equity risk premium permanently shrunk as history replaces yesterday's demons with today's pale (but no less frightening) imitations? |
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http://www.efficientfrontier.com/ef/102/taleb.htm
(1188 words)
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| | [No title] |
| | As risks are reduced, like in strong economic times and easy monetary policy times (there are good papers on this), the value premium is likely to shrink (investors get a one time capital gain and then lower risk premium going forward). | | | Fact is (we know now) that the value risk premium in early 2000 (corresponding with Bernstein's "Who Killed Value") was as high as it had ever been, at least as high as post-great depression years. | | | Secondly, I think if Value premiums were going to be arbitraged away, they would have done so in the few years after 1992 and Fama/French's "Characteristics, Covariances..." paper, which probably is a vote in favor of the risk based explaination. |
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http://socialize.morningstar.com/NewSocialize/Asp/FullConv.asp?forumId=F100000015&convSeqNumber=48910&mrr=1143133080
(1683 words)
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| | Wilmott Forums - Equity Risk Premium, dividend puzzle and duration |
| | My remark is only that agency risk is a big (varying, but big) component of stocks risk, and therefore, it should also be reflected in the risk premium. | | | Thus, neither of these equations can sustain a risk premium, be it in the form of agency risk, equity risk, etc. | | | Consequently, these two equations implicitly imply a zero risk premium simply because of their nature, which assumes all growth parameters remain constant forever. |
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http://www.wilmott.com/messageview.cfm?catid=4&threadid=1953
(3182 words)
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| | Theory of Risk Aversion |
| | In Figure 7, the risky asset y is represented by the chord connecting points A and B on the utility curve, and E[u(y)] is expected utility of asset y. | | | thus the risk premium is calculated using the measure of risk aversion around y | | | A premium is a premium, and it will be paid before one knows whether y |
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http://cepa.newschool.edu/het/essays/uncert/aversion.htm
(6248 words)
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| | Cyberlibris blog: Finance and the equity risk premium: A solved puzzle? |
| | Remember that the puzzle is about the equity risk premium being too high, in other words (for the CAPM aficionados) the empirical (observed) slope of the Security Market Line being too steep. | | | The line starts at the risk-free rate where equity (beta) risk is zero and then goes linearly upward at a rate given by the equity premium (so that you get compensated for the extra equity risk you have to carry). | | | Now for those who'd like to know where finance was in 1999 here is a piece entitled New facts in finance. |
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http://cyberlibris.typepad.com/blog/2005/09/finance_and_the.html
(1234 words)
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| | SSRN-The Long-Run Equity Risk Premium by John Graham, Campbell Harvey |
| | The individual uncertainty is deduced from the 80% confidence interval that each respondent provides for his or her risk premium assessment. | | | Each quarter the survey also provides measures of cross-sectional disagreement about the risk premium, skewness, and a measure of individual uncertainty. | | | Keywords: Cost of capital, equity premium, long-term market returns, long-term equity returns, expected excess returns, disagreement, individual uncertainty, skewness, asymmetry, survey methods, risk and reward |
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http://papers.ssrn.com/sol3/papers.cfm?abstract_id=795369
(316 words)
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| | Equity Risk Premium |
| | The risk-free rate in the market is often quoted as the rate on longer-term government bonds, which are considered risk free because of the low chance that the government will default on its loans. | | | This excess return compensates investors for taking on the relatively higher risk of the equity market. | | | - CAPM helps you determine what return you deserve for putting your money at risk. |
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http://www.investopedia.com/terms/e/equityriskpremium.asp
(295 words)
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| | EDHEC-Risk - Is Value Riskier than Growth? |
| | They also observe that the asymmetric risk dispersion between value and growth persists when betas are measured with respect to unexpected industrial production growth. | | | Lakonishok J., Shleifer A., Vishny R. W., “Contrarian Investment, Extrapolation, and Risk”, Journal of Finance, vol. | | | Taming Uncertainly : Risk Managment for the entire Enterprise... |
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http://www.edhec-risk.com/research_news/choice/RISKReview1064814802387731896?printable=1
(601 words)
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| | SSRN-Earnings Quality and the Equity Risk Premium: A Benchmark Model by Kenton Yee |
| | Moreover, only the systematic (undiversified) component of earnings quality risk contributes to the equity risk premium. | | | Absent fundamental risk, poor earnings quality cannot affect the equity risk premium. | | | This article solves a model that links earnings quality to the equity risk premium in an infinite-horizon consumption CAPM economy. |
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http://papers.ssrn.com/sol3/papers.cfm?abstract_id=846546
(321 words)
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| | Options And The Currency Risk Premium (ResearchIndex) |
| | 9 Conditional Variance and the Risk Premium in the Foreign Exc.. | | | First, I test for "simple efficiency", under which there is no risk premium and expectations are rational. | | | 1 Currency Preferences, Purchasing Power Risks, and the Determ.. |
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http://citeseer.ist.psu.edu/433353.html
(694 words)
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| | Market Risk Premium |
| | S&P Composite Price Index and its Risk Premium - An excellent article by Ruben Cohen on risk premium in a world that is not yet perfect, but is approaching it. | | | Read this tutorial and these and other financial concepts will be made clear. | | | It is equal to the slope of the security market line (SML). |
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http://baystreet.investopedia.com/terms/m/marketriskpremium.asp
(69 words)
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| | risk premium Definition |
| | equity risk premium, premium, Capital Asset Pricing Model, expected return, hurdle rate | | | Unlike fundamental analysis, technical analysis ignores the company underlying the stock and instead tries to predict price changes by studying the market itself. | | | This article talks about diversification and balancing risk with your stock selections. |
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http://www.investorwords.com/4306/risk_premium.html
(133 words)
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| | Terrorism Puts a “Risk Premium” on Diesel |
| | The “security premium” accounts for five to 10 dollars per barrel, although it is difficult to know for certain, Costello said. | | | Despite the efforts of Saudi Arabia to bring down crude costs, the threat of terrorism has created a “risk premium,” according to analyst Chris Brady of Commercial Motor Vehicle Consulting. | | | Although the steps Saudi Arabia is taking to increase crude supplies is a positive step, Costello is skeptical this will make any dramatic improvement in diesel prices. |
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http://driversmag.com/ar/fleet_terrorism_puts_risk_2/index.html
(368 words)
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| | Stochastic Volatility & Risk Premium |
| | The missing link in the case of stochastic volatility, stochastic interest rates… The risk premium (the market price of risk), heuristically | | | Foreign currency options; Garman-Kohlhagen model and it’s stochastic volatility and stochastic interest rates extensions; risk premium for currency options | | | »Risk Budgeting and Effective Risk Control Techniques for Hedge Funds |
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http://www.garp.com/events/stochasticvolatility/programme.htm
(543 words)
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| | Oil prices include growing 'risk premium' - Oil & Energy - MSNBC.com |
| | Last week, A.G. Edwards analyst Bruce Lanni calculated that, based on the levels of oil stockpiles, the “fair value” of oil was about $27 a barrel. | | | And though difficult to assess precisely, the added risk represents a real cost, according to Phil Flynn at Alaron Trading in Chicago. | | | As oil prices remain stubbornly above $40, strong demand and tight supplies continue to push the cost of crude to record levels. |
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http://www.msnbc.msn.com/id/4962032
(1015 words)
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| | Fool.com: Risk Premium (Bore Port) October 12, 1998 |
| | So if interest rates are 7% and we discount it back at 7% (which Charlie says I never do anyway -- and he's correct), then we'd require a substantial discount from that present value figure in order to warrant buying it. | | | Buffett: Well, we adjust by simply trying to buy it at a big discount from the present value calculated using the risk free interest rate. | | | And, obviously, we can always buy government bonds. |
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http://www.fool.com/BoringPort/1998/BoringPort981012.htm
(760 words)
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| | risk premium definition - Dictionary - MSN Encarta |
| | finance return required to justify risk: the additional return that investors need to compensate them for the possibility that an investment may lose money. | | | risk premium definition - Dictionary - MSN Encarta | | | Search for "risk premium" in all of MSN Encarta |
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http://encarta.msn.com/encnet/features/dictionary/DictionaryResults.aspx?refid=561539325
(79 words)
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| | Premium - Wikipedia, the free encyclopedia |
| | Risk premium, in finance, the monetary difference between the guaranteed return and the possible return on an investment | | | Premium rate telephone number, the UK Premium Bond | | | In marketing an bundled good or service, often characterised as "free". |
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http://en.wikipedia.org/wiki/Premium
(118 words)
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| | Risk premium - definition of Risk premium by the Free Online Dictionary, Thesaurus and Encyclopedia. |
| | Risk Management, Operational Controls, Compliance, and Asset Quality | | | Risk premium is not available in the general English dictionary and thesaurus. | | | This information should not be considered complete, up to date, and is not intended to be used in place of a visit, consultation, or advice of a legal, medical, or any other professional. |
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http://www.thefreedictionary.com/Risk+premium
(95 words)
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| | Quarterly Survey of Alternative Investment Risk Premium |
| | Question 2.- Long/Short Equity Hedge Fund Risk Premium | | | Question 1.- Fund of Hedge Fund Risk Premium | | | As of March 31, 2005 the 12 months treasury rate was 3.34%. |
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http://www.aa-center.net/Mailings/survey/risk_premium.php
(232 words)
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