Risk-Neutral Pricing for Arbitrage Pricing Theory
نویسندگان
چکیده
منابع مشابه
Liquidity risk and arbitrage pricing theory
Classical theories of financialmarkets assume an infinitely liquidmarket and that all traders act as price takers. This theory is a good approximation for highly liquid stocks, although even there it does not apply well for large traders or for modelling transaction costs. We extend the classical approach by formulating a new model that takes into account illiquidities. Our approach hypothesize...
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We generalize the Arbitrage Pricing Theory (APT) to include the contribution of virtual arbitrage opportunities. We model the arbitrage return by a stochastic process. The latter is incorporated in the APT framework to calculate the correction to the APT due to the virtual arbitrage opportunities. The resulting relations reduce to the APT for an infinitely fast market reaction or in the case wh...
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We shall study the paper by Cetin, Jarrow, Protter, [1]. This pa-per extends classical arbitrage pricing theory to include liquidity risk bystudying an economy where the security’s price depends on the trade size.Extended first and second fundamental theorems of asset pricing are in-vestigated. In an approximately complete market, derivative prices areshown to be the cla...
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This article provides an exact Bayesian frame work for analyzing the arbitrage pricing the ory (APT). Based on the Gibbs sampler, we show how to obtain the exact posterior distributions for functions of interest in the factor modeL In particular, we propose a measure of the APT pricing deviations and obtain its exact posterior distribution. Using monthly portfolio returns grouped by industry ...
متن کاملRisk Neutral Pricing
A classical problem, coming up frequently in practical business, is the valuation of future cash flows which are somewhat risky. By the term “risky” we mean that the payment is not of a deterministic nature; rather there is some uncertainty on the amount of the future cash flows. Of course, in real life virtually everything happening in the future contains some elements of riskiness. As a first...
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ژورنال
عنوان ژورنال: Journal of Optimization Theory and Applications
سال: 2020
ISSN: 0022-3239,1573-2878
DOI: 10.1007/s10957-020-01699-6