The no arbitrage conditions are derived in the explicit form for the market, where the zero coupons bonds of various maturities are accessible for the investors to draw up the portfolios. It is supposed, that the investor at any moment of time has a possibility to make the self-financed...

Based on the insight that risk exposure as quantified in the consumption based asset pricing model (CCAPM) is linearly proportional to the cash flow growth rate, we introduce a discounted cash flow model with a time-varying expected return structure matching the implicitly assumed risk exposure...

In this paper we are concerned with the role of factor strength and pricing errors in asset pricing models, and their implications for identification and estimation of risk premia. We establish an explicit relationship between the pricing errors and the presence of weak factors that are...

Arbitrage trading strategies are a class of trading strategies that involve buying and selling financial instruments to take advantage of price discrepancies. The goal of arbitrage trading is to make a profit from the differences in prices between securities or markets, without taking on...

This paper investigates the limit properties of mean-variance (mv) and arbitrage pricing (ap) trading strategies using a general dynamic factor model, as the number of assets diverge to infinity. It extends the results obtained in the literature for the exact pricing case to two other cases of...

This paper investigates the limit properties of mean-variance (mv) and arbitrage pricing (ap) trading strategies using a general dynamic factor model, as the number of assets diverge to infinity. It extends the results obtained in the literature for the exact pricing case to two other cases of...

Covered interest parity (CIP) is the theoretical relationship that explains the price difference between spot and forward exchange rates in terms of the interest rate differential between the home and the foreign currency. CIP arbitrage maintains the parity pricing between a host of financial...

We develop a framework for computing the total valuation adjustment (XVA) of a European claim accounting for funding costs, counterparty credit risk, and collateralization. Based on no-arbitrage arguments, we derive backward stochastic differential equations (BSDEs) associated with the...

In this paper we combine the heterogeneous agent literature with the market microstructure literature in order to introduce time varying measures of price discovery based on underlying profit maximizing behavior. We set up a heterogeneous agent model with arbitrageurs and chartists, and allow...