where traders exploit price discrepancies between markets or instruments to generate risk-free profits. For institutional investors, such as hedge funds or pension funds, risk-neutral models ...

In a hypothetical example, you might pay $950 today for a T-bill that will mature at $1,000, netting you a risk-free profit of $50. You can also buy longer-term Treasury notes that are close to ...

is the difference between the expected return on a market portfolio and the risk-free rate. The market risk premium is equal to the slope of the security market line (SML), a graphical ...