What is Risk-Free Debt?

What is Risk-Free Debt?

Keith Mullin

35 years: Capital markets editorial

The concept of risk-free debt is deeply embedded in financial markets as short-hand for high-quality liquid debt that retains its value over time. In the first video of this series, Keith explains what is meant by "risk-free" and how nothing in financial markets can ever carry zero risk.

The concept of risk-free debt is deeply embedded in financial markets as short-hand for high-quality liquid debt that retains its value over time. In the first video of this series, Keith explains what is meant by "risk-free" and how nothing in financial markets can ever carry zero risk.

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What is Risk-Free Debt?

9 mins 41 secs

Overview

Risk-free debt is deeply embedded in financial markets as short-hand for high-quality liquid debt that typically retains its value over time. Also, it’s referred to as debt that has a zero chance of defaulting.

Key learning objectives:

  • Define Risk-free debt and identify its properties

  • Be able to calculate expected return using CAPM

  • Define HQLA, and explain their benefits

  • Discuss the different types and examples of HQLA

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