Risk-Free Asset

A risk-free asset is an investment that is considered to carry no risk of financial loss, typically because it is backed by a government or institution with a high credit rating. In theory, a risk-free asset generates a guaranteed return with no risk of default. The most common example of a risk-free asset is a government bond issued by a stable country, such as U.S. Treasury bonds. Risk-free assets are often used as benchmarks in finance to measure the performance of riskier investments.

Example

U.S. Treasury bonds are considered risk-free assets because they are backed by the U.S. government, which is unlikely to default on its debt obligations.