Examlex
Indifference curves graphically represent
Risk Premiums
The additional return expected by an investor for taking on a higher risk compared to a risk-free investment.
No Arbitrage
A principle stating that it is impossible to achieve risk-free profits from inconsistent or mispriced asset prices in efficient markets, as arbitrage opportunities are quickly exploited and corrected.
Risk Premium
The extra return over the risk-free rate that investors require to compensate them for the risk of holding a risky asset.
Risk Aversion
A person's or entity's reluctance to take risks, preferring lower returns with known risks over higher returns with unknown risks.
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