Capital Asset Pricing Model (CAPM)
Definition
A financial model that calculates the expected return of an asset based on its systematic risk relative to the market.
Formula / Rules
E(R_i) = R_f + β_i (E(R_m) - R_f)
Example
A stock with beta 1.2, risk-free rate 3%, and market return 8% has expected return of 9%.
Related Terms
Frequently Asked Question
What is the Capital Asset Pricing Model (CAPM)?
CAPM is a financial model that calculates the expected return of an asset based on its systematic risk relative to the market, using the formula E(R_i) = R_f + β_i (E(R_m) - R_f).
APA Citation
Last updated:
· Source: VixShield Trading Glossary — From SPX Mastery by Russell Clark
⚠️ Not financial advice. This definition is educational content from the SPX Mastery book series by Russell Clark (VixShield). Past performance is not indicative of future results. Trading options involves substantial risk of loss and is not appropriate for all investors. Always paper trade before risking real capital.