| Capital allocation line (CAL) | A graph showing all feasible risk-return combinations of a risky and risk-free asset.
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| Capital market line (CML) | A capital allocation line provided by the market index portfolio.
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| Certainty equivalent rate | The certain return providing the same utility as a risky portfolio.
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| Complete portfolio | The entire portfolio, including risky and risk-free assets.
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| Fair game | An investment prospect that has a zero risk premium.
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| Indifference curve | A curve connecting all portfolios with the same utility according to their means and standard deviations.
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| Mean-variance criterion | The selection of portfolios based on the means and variances of their returns. The choice of the higher expected return portfolio for a given level of variance or the lower variance portfolio for a given expected return.
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| Passive strategy | See passive management.
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| Reward-to-variability ratio | Ratio of a portfolio's risk premium to its standard deviation.
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| Risk-averse, risk-neutral, risk lover | A risk-averse investor will consider risky portfolios only if they provide compensation for risk via a risk premium. A risk-neutral investor finds the level of risk irrelevant and considers only the expected return of risk prospects. A risk lover is willing to accept lower expected returns on prospects with higher amounts of risk.
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| Risk lover | See risk-averse.
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| Risk-neutral | See risk-averse.
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| Risk premium | An expected return in excess of that on riskfree securities. The premium provides compensation for the risk of an investment.
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| Risk-free asset | An asset with a certain rate of return; often taken to be short-term T-bills.
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| Utility | The measure of the welfare or satisfaction of an investor.
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