Risk premium is a fundamental concept in finance that represents the difference between the expected return on a risky asset and the return on a risk-free asset. This premium compensates investors for the additional risk associated with uncertain outcomes of potentially volatile investments. Risk premium can be determined for individual assets, for classes of assets such as stocks or commodities, or even for entire markets relative to risk-free rates, often represented by government bonds. Common calculations for risk premium include the equity risk premium which typically reflects the expected excess return over government bonds when investing in equities.