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3 Cards in this Set
- Front
- Back
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Expected returns
- Risk premium - Scenarios - Asset-pricing |
Risk premium: return above risk-free rate for risk borne when investing.
Market/Systematic Risk: entire market may drop Inflation risk: in higher inflation or high uncertainty, higher returns required Interest rate risk Exchange rate risk Liquidity risk: risk that buyer may not be found easily Default/credit risk Specific, idiosyncratic, unsystematic risk |
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Scenarios
A portfolio return is estimated based on different expected states of the economy (-ve, stable, +ve) each is assigned a probability. Prob x Return for each scenario are summed and give Expected return. |
Asset Pricing
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