Risk premium is a risk premium is one way to measure the risk you'd take in buying a specific investment. Some analysts define risk premium as the difference between the current risk-free return-the yield on a 13-week US Treasury bill-and the total return on the investment you're considering. Other measures of risk premium, which are applied specifically to stocks, are a stock's beta, or the volatility of that stock in relation to the stock market as a whole, and a stock's alpha, which is based on an evaluation of the stock's intrinsic value. Similarly, the higher interest rates that bond issuers typically offer on riskier bonds may be considered a risk premium, since the higher rate, and potentially greater return, is a way to compensate for the greater risk.
| APA | Barry Goldsmith. (2010). risk premium. Retrieved September 30, 2026, from http://smartdefine.org/risk_premium/definitions/1162643 |
| Chicago | Barry Goldsmith. 2010. "risk premium" http://smartdefine.org/risk_premium/definitions/1162643 (accessed September 30, 2026). |
| Harvard | Barry Goldsmith 2010, risk premium, Smart Define, viewed 30 September, 2026, <http://smartdefine.org/risk_premium/definitions/1162643>. |
| MLA | Barry Goldsmith. "risk premium" 21 October 2010. Web. 30 September 2026. <http://smartdefine.org/risk_premium/definitions/1162643> |