Editing Interest rate (section)

===Risk===
The level of [[risk]] in investments is taken into consideration. [[volatility (finance)|Riskier]] investments such as [[share (finance)|shares]] and [[junk bond]]s are normally expected to deliver higher returns than safer ones like [[government bond]]s.

The additional return above the risk-free nominal interest rate which is expected from a risky investment is the [[risk premium]]. The risk premium an investor requires on an investment depends on the [[risk-neutral measure|risk preferences]] of the investor. Evidence suggests that most lenders are risk-averse.<ref>Benchimol, J., 2014. [https://ideas.repec.org/a/eee/reecon/v68y2014i1p39-56.html Risk aversion in the Eurozone], [[Research in Economics]], vol. 68, issue 1, pp. 39–56.</ref>

A '''maturity risk premium''' applied to a longer-term investment reflects a higher perceived risk of default.

There are four kinds of risk:
* [[repricing risk]]
* [[basis risk]]
* yield curve risk
* optionality