This study outlines an affine term structure model (ATSM) of TIPS that decomposes yields into real expected rates, real term premiums, and liquidity premiums. The estimation incorporates an observable liquidity factor that more comprehensively captures limits to arbitrage implied by yield curve...

Recent empirical studies suggest a downward sloping term structure of Sharpe ratios. We present a theoretical framework in continuous time that can cope with such a non-flat forward curve of risk prices. The approach departs from an arbitrage-free and incomplete market setting when different...

In a one price economy, the Fundamental Theorem of Asset Pricing (FTAP) establishes that no-arbitrage is equivalent to the existence of an equivalent martingale measure. Such an equivalent measure can be derived as the normal unit vector of the hyperplane that separates the attainable gain...