We know that there are 2 types of risk which are systematic and unsystematic risk. Systematic risk can be estimate through the calculation of β in CAPM formula. But how can we estimate the ...
Debunking risk premium via “hedging” argument? (or why even in the real world $\mu$ should equal $r$)
Since I began thinking about portfolio optimization and option pricing, I've struggled to get an intuition for the risk premium, i.e. that investors are only willing to buy risky instruments when they ...
After years of mathematical finance I am still not satisfied with the idea of a risk premium in the case of stocks. I agree that (often) there is a premium for long dated bonds, illiquid bonds or ...