Equilibrium market price of risk
The slope of the capital market line (CML). Since the CML represents the expected return offered to compensate for a perceived level of risk, each point on the line is a balanced market condition, or equilibrium. The slope of the line determines the additional expected return needed to compensate for a unit change in risk. The equation of the CML is defined by the capital asset pricing model.
Nearby TermsEquilibrium Equilibrium exchange rate Equilibrium market price of risk Equilibrium price Equilibrium rate of interest
Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University