Standard Article

Risk Premia

  1. Adrien Verdelhan

Published Online: 15 MAY 2010

DOI: 10.1002/9780470061602.eqf03012

Encyclopedia of Quantitative Finance

Encyclopedia of Quantitative Finance

How to Cite

Verdelhan, A. 2010. Risk Premia. Encyclopedia of Quantitative Finance. .

Author Information

  1. Boston University, Boston, MA, USA

Publication History

  1. Published Online: 15 MAY 2010


Risk premia are, by definition, expected excess returns that compensate investors for aggregate risk. There is now a wealth of empirical evidence on risk premia. Expected excess returns in equity, bond, and currency markets appear sizable and time-varying. However, few models reproduce these findings. Only three classes of models can currently account for such risk premia: habit preferences, long-run risk, and disaster risk models.


  • excess returns;
  • Euler equation;
  • predictability