How CBO Estimates the Market Risk of Federal Credit Programs: Working Paper 2021-14
Michael Falkenheim and
No 57581, Working Papers from Congressional Budget Office
Market risk is the component of financial risk that remains even after investors have diversified their portfolios as much as possible. Investors demand additional compensation to take on market risk. In that way, they can earn more than the return on Treasury securities, which are regarded as risk free, after netting out the average cost of default. The Congressional Budget Office supplements its formal cost estimates, which do not include the cost of market risk, with fair-value estimates, which include that cost. Because the fair-value cost of credit programs includes
JEL-codes: G10 G12 G18 H50 H81 H83 (search for similar items in EconPapers)
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