Business / Finance Glossary

Risk-Prone: Willing to pay money to assume risk from others.

Risk-Return Trade-Off: The basic concept that higher expected returns accompany greater risk, and vice versa.

Risk-Reward Ratio: Relationship of substantial reward corresponding to the amount of risk taken; mathematically represented by dividing the expected return by the standard deviation.

Riskless Arbitrage: The simultaneous purchase and sale of the same asset to yield a profit.

Riskless Or Risk-Free Asset: An asset whose future return is known today with certainty. The risk-free asset is commonly defined as short-term obligations of the U.S. government.

Riskless Rate: The rate earned on a riskless investment, typically the rate earned on the 90-day U.S. Treasury Bill.

Riskless Rate Of Return: The rate earned on a riskless asset.

Riskless Transaction: A transaction that is guaranteed a profit, such as the arbitrage of a temporary differential between commodity prices in two different markets. The evaluation of whether dealer markups and m . . . View Full Definition

Risky Asset: An asset whose future return is uncertain.

Road Show: A promotional presentation by an issuer of securities to potential buyers about the desirable qualities of the investments.

Rocket Scientist: An employee of an investment firm (often having a Ph.D. in physics or mathematics) that works on highly mathematic models of derivative pricing.

Roll Down: To move to an option position with a lower exercise price.

Roll Forward: To move to an option position with a later expiration date.

Roll Order: (1) Dividend roll; (2) Replacement of a maturing position with an identical one in the new maturity; (3) Recognizition of capital gain or loss while reestablishing the position at the risk o . . . View Full Definition

Roll Over: To reinvest funds received from a maturing security in a new issue of the same or a similar security.

Roll Up: To move to an option position with a higher exercise price. In venture capital, refers to the venture capitalist forcing small firms to merge operations in order to reduce costs

Roll, Richard: Author of path-breaking work on asset pricing including the famous Roll critique. Finance professor at UCLA.

Rollover: Means that a loan is periodically repriced at an agreed spread over the appropriate, currently prevailing rate. Most term loans in the Euromarket are made on a rollover basis as to current L . . . View Full Definition

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