What is security market line？

The security market line (SML) is a graphical representation of the relationship between the expected return and the systematic risk of an asset. It shows the expected return that an investor should receive for the amount of systematic risk taken on by investing in that asset. The SML is derived from the capital asset pricing model (CAPM), which assumes that the expected return of an asset is directly proportional to its systematic risk or beta. The SML is a useful tool for investors to evaluate the risk and return of different investment opportunities and to make informed investment decisions.