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b = the long-run mean to which the interest rate reverts; the expected interest rate in the long run; a = the speed of reversion of the interest rate to its long-run mean (e.g., a = 2 means the interest is expected to return to its long-term mean within half a year, and a = 1/5 means it would take 5 years).
A risk premium is a measure of excess return that is required by an individual to compensate being subjected to an increased level of risk. [1] It is used widely in finance and economics, the general definition being the expected risky return less the risk-free return, as demonstrated by the formula below. [2]
Reinsurance sidecars, conventionally referred to as "sidecars", are financial structures that are created to allow investors to take on the risk and return of a group of insurance policies (a "book of business") written by an insurer or reinsurer (henceforth re/insurer) and earn the risk and return that arises from that business.
Risk and return play a part in our nonfinancial lives, as well. Think of that lovely person you'd like to date, for example. Asking him or her out involves the risk of being turned down or ...
The expected return (or expected gain) on a financial investment is the expected value of its return (of the profit on the investment). It is a measure of the center of the distribution of the random variable that is the return. [1] It is calculated by using the following formula: [] = = where
Fund managers, classically, [93] define the risk of a portfolio as its variance [11] (or standard deviation), and through diversification the portfolio is optimized so as to achieve the lowest risk for a given targeted return, or equivalently the highest return for a given level of risk; these risk-efficient portfolios form the "Efficient ...
Individuals comfortable with higher risk who want investment opportunities within their policy. ... numbers tell the story best. Take, for example, a healthy 25-year-old woman shopping for a ...
For example, a personal injuries insurance policy does not transfer the risk of a car accident to the insurance company. The risk still lies with the policyholder namely the person who has been in the accident. The insurance policy simply provides that if an accident (the event) occurs involving the policyholder then some compensation may be ...