# Risk-Free Rate

*Risk & Portfolio — Finicade finance glossary*

The risk-free rate is the return available with no credit risk, proxied in practice by short-term government debt in the same currency. It is the anchor of nearly every valuation: discount rates, CAPM, option prices and hurdle rates all start from it and add compensation for risk. Nothing is truly risk-free — government bonds still carry inflation and reinvestment risk — so the term means default-free, not loss-proof.

**Also known as:** riskless rate, risk free rate of return

**Related terms:** [Treasury Bill](https://finicade.com/glossary/treasury-bill), [CAPM (Capital Asset Pricing Model)](https://finicade.com/glossary/capm), [Risk Premium](https://finicade.com/glossary/risk-premium), [Discount Factor](https://finicade.com/glossary/discount-factor), [Real vs Nominal](https://finicade.com/glossary/real-vs-nominal-interest-rates)

Source: https://finicade.com/glossary/risk-free-rate