Risk premium

Updated: Aug 20, 2021

The amount that a risk-averse individual is willing to pay to avoid risk.

Risk premium

The additional return that a risky asset must pay over that paid by the risk-free security in order to induce risk-averse investors to purchase it. The risk premium is endogeneously determined by the equilibrium in financial markets.

Reference: Oxford Press Dictonary of Economics, 5th edt.

Sources & references
Risk disclaimer
James Knight
Editor of Education
James is the Editor of Education for Invezz, where he covers topics from across the financial world, from the stock market, to cryptocurrency, to macroeconomic markets.... read more.