Risk free rate: related pages
Alpha (Jensen's alpha, portfolio alpha) The alpha of a security or fund is its out-performance over the risk adjusted return, with risk measured by beta.
Beta Beta is a measure of the correlation between the value of a security and the market. Beta is used to calculate discount rates for CAPM.
Arbitrage pricing theory Arbitrage pricing theory; a valuation method which is theoretically sound but which is difficult to apply in practice.
CAPM A method of valuing securities or an investment using a discounted cash flow (DCF) using a risk adjusted discount rate.
Risk premium The difference between the rate of return on a security (or a market or an investment) and the risk free rate of return.
Equity risk premium The difference between the expected rate of return of the stock market and the risk free rate of return; the amount of extra return investors demand for taking the extra risk of equity investment.
Yield spread The difference between the yield on a bond and the yield on a similar risk free debt instrument.
Excess return The amount by which the return on an investment is greater than the risk free rate of return.
Time value of money The idea that money is worth more if received sooner rather than later.
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