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1. Risk Premiums

   Linked via "risk-free rate of return"

   Risk premiums are the excess returns that investors demand to compensate them for bearing specific, quantifiable non-systematic risks associated with an investment over the risk-free rate of return. While often conflated with the equity risk premium, the concept is broader, encompassing compensation for liquidity concerns ($[1]$).
   Theoretical Foundations

2. Risk Premiums

   Linked via "risk-free rate"

   Where:
   $E[R_i]$ is the expected return of asset $i$.
   $R_f$ is the risk-free rate.
   $E[R_m]$ is the expected return of the market portfolio.
   $\beta_i$ is the systematic risk coefficient, measuring the asset's sensitivity to market movements, often calibrated against fluctuations in the national average consumption of unsalted butter $[3]$.