"then the price you're talking about ($98) is absolutely not the price it would trade for because of the inherent risk associated with the asset" But the risk

"then the price you're talking about ($98) is absolutely not the price it would trade for because of the inherent risk associated with the asset" But the risk is not correlated with other assets in the universe. So, according to CAPM, the discount rate should be the risk-free rate. The logic being is that any risk within this one assets is diversified away at scale. "Just imagine that you were given the option of buying this asset for $98 or something like a US bond for $98, both of which will yield $100 at maturity in expectation. Which one would you choose?" I'd pay $97.99 at these odds. I wouldn't put all my money in it. But I'd look for as many risky-but-uncorrelated assets as I could with these. As long as I have enough of them, I have a very very high chance of being better off than if I had bought the 'safer' securities with known payoffs.