Certainty Equivalent Return
The certain (zero risk) return an investor would trade for a given (larger) return with an associated risk. For example, a particular investor might trade an uncertain expected 4% active return with 6% risk, for a certain active return of 1.5%. Used as a way to incorporate individual investor risk tolerances into financial decisions.
Nearby TermsCents per share Certainty equivalent Certainty Equivalent Return Certificate Certificate of Accrual on Treasury Securities (CATS)
Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University