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We develop an Arbitrage Pricing Theory framework extension to study the pricing of squared returns/volatilities. We …
Persistent link: https://www.econbiz.de/10012900711
resulting from approximation) are in effect model-independent pricing bounds in every arbitrage-free model. More specifically …
Persistent link: https://www.econbiz.de/10013116713
Arbitrage Pricing Theory (APT) framework. We follow the APT-related literature and estimate the common factor structure from a …
Persistent link: https://www.econbiz.de/10012855490
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...
Persistent link: https://www.econbiz.de/10012118575
We propose a novel no-arbitrage framework, which exploits convex asset pricing constraints to study investors’ marginal …
Persistent link: https://www.econbiz.de/10012613015
We test whether the Nelson and Siegel (1987) yield curve model is arbitrage-free in a statistical sense. Theoretically …, the Nelson-Siegel model does not ensure the absence of arbitrage opportunities, as shown by Bjork and Christensen (1999 …-coupon yield curve data from the US market, we find that the no-arbitrage parameters are not statistically different from those …
Persistent link: https://www.econbiz.de/10013316584
equivalence of absence of arbitrage, the existence of a positive linear pricing rule, and the existence of an optimum for some … traditional measures of portfolio performance. Further conceptual results include aggregation and mutual fund separation theory …
Persistent link: https://www.econbiz.de/10014023861
^d-valued process. A strategy H is called extreme if it represents a maximal arbitrage opportunity. By this we mean that H generates at … zero. We characterize those subsets of F^e, on which no arbitrage opportunities exist. …
Persistent link: https://www.econbiz.de/10010270405
Focusing on capital asset returns governed by a factor structure, the Arbitrage Pricing Theory (APT) is a one …-period model, in which preclusion of arbitrage over static portfolios of these assets leads to a linear relation between the … expected return and its covariance with the factors. The APT, however, does not preclude arbitrage over dynamic portfolios …
Persistent link: https://www.econbiz.de/10010283426
a martingale under an equivalent probability. As a result, in models of asset prices based on such diffusions, arbitrage … martingale models of arbitrage and bubbles are not robust to small trading and monitoring frictions …
Persistent link: https://www.econbiz.de/10014043330