Arbitrage Pricing Theory
From WilmottWiki
The Arbitrage Pricing Theory (APT) of Stephen Ross represents the returns on individual assets as a linear combination of multiple random factors. These random factors can be fundamental factors or statistical. For there to be no arbitrage opportunities there must be restrictions on the investment processes.
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References
- Ross, S 1976 The Arbitrage Theory of Capital Asset Pricing. J. of Economic Theory 13 341-360
- Wilmott, P 2006 Frequently Asked Questions in Quantitative Finance. John Wiley & Sons
