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2. Risk-free rate - Wikipedia

   en.wikipedia.org/wiki/Risk-free_rate

   The risk-free rate is also a required input in financial calculations, such as the Black–Scholes formula for pricing stock options and the Sharpe ratio. Note that some finance and economic theories assume that market participants can borrow at the risk-free rate; in practice, very few (if any) borrowers have access to finance at the risk free ...

3. Single-index model - Wikipedia

   en.wikipedia.org/wiki/Single-index_model

   The term () represents the movement of the market modified by the stock's beta, while represents the unsystematic risk of the security due to firm-specific factors. Macroeconomic events, such as changes in interest rates or the cost of labor, causes the systematic risk that affects the returns of all stocks, and the firm-specific events are the ...

4. Black–Scholes model - Wikipedia

   en.wikipedia.org/wiki/Black–Scholes_model

   Risk-free rate: The rate of return on the riskless asset is constant and thus called the risk-free interest rate. Random walk: The instantaneous log return of the stock price is an infinitesimal random walk with drift; more precisely, the stock price follows a geometric Brownian motion , and it is assumed that the drift and volatility of the ...

5. Risk-Free Rate: Definition and Usage - AOL

   www.aol.com/news/risk-free-rate-definition-usage...

   Continue reading ->The post Risk-Free Rate: Definition and Usage appeared first on SmartAsset Blog. When building an investment portfolio, finding the right balance between risk and reward is ...

6. Sharpe ratio - Wikipedia

   en.wikipedia.org/wiki/Sharpe_ratio

   The risk-free return is constant. Then the Sharpe ratio using the old definition is = = Example 2. An investor has a portfolio with an expected return of 12% and a standard deviation of 10%. The rate of interest is 5%, and is risk-free.

7. Risk-neutral measure - Wikipedia

   en.wikipedia.org/wiki/Risk-neutral_measure

   They will be different because in the real-world, investors demand risk premia, whereas it can be shown that under the risk-neutral probabilities all assets have the same expected rate of return, the risk-free rate (or short rate) and thus do not incorporate any such premia. The method of risk-neutral pricing should be considered as many other ...