Risk premium

A risk premium is the minimum difference between the expected value of an uncertain bet that a person is willing to take and the certain value that he is indifferent to.

Finance

In finance, the risk premium can be the expected rate of return above the risk-free interest rate.

Related Topics:
Finance - Risk-free interest rate

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• Debt: In terms of bonds it usually refers to the credit spread (the difference between the bond interest rate and the risk-free rate).
• Equity: In the equity market it is the returns of a company stock, a group of company stock, or all stock market company stock, minus the risk-free rate. The return from equity is the dividend yield and capital gains. The risk premium for equities is also called the equity premium.