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Arbitrage Pricing

Tomas Björk

in Arbitrage Theory in Continuous Time

Published in print:
2004
Published Online:
October 2005
ISBN:
9780199271269
eISBN:
9780191602849
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/0199271267.003.0007
Subject:
Economics and Finance, Financial Economics

This chapter examines a special case of the general model derived in Chapter 6. It derives the model of a financial market, and then analyses the pricing of financial derivatives, specifically the ... More


ARBITRAGE-FREE PRICING IN COMPLETE MARKETS

Patrick L. Anderson

in The Economics of Business Valuation: Towards a Value Functional Approach

Published in print:
2013
Published Online:
September 2013
ISBN:
9780804758307
eISBN:
9780804783224
Item type:
chapter
Publisher:
Stanford University Press
DOI:
10.11126/stanford/9780804758307.003.0010
Subject:
Economics and Finance, Financial Economics

The author describes one of the breakthrough concepts of modern finance: the use of the no arbitrage principle in complete markets as the basis for the powerful mathematics of “risk neutral” or ... More


The Martingale Approach to Arbitrage Theory

Tomas Björk

in Arbitrage Theory in Continuous Time

Published in print:
2004
Published Online:
October 2005
ISBN:
9780199271269
eISBN:
9780191602849
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/0199271267.003.0010
Subject:
Economics and Finance, Financial Economics

This chapter analyses a market model made up of N + 1 a priori given asset price processes S0, S1, ..., SN. Typically, the model is specified by giving the dynamics of the asset price processes under ... More


The Determination of Equity Prices

Hendrik S. Houthakker and Peter J. Williamson

in The Economics of Financial Markets

Published in print:
1996
Published Online:
November 2003
ISBN:
9780195044072
eISBN:
9780199832958
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/019504407X.003.0006
Subject:
Economics and Finance, Financial Economics

Drawing on Chs. 4 and 5 (which discuss the supply and demand for securities separately), this chapter investigates whether economics has anything helpful to say about the prices of shares and related ... More


Arbitrage Pricing

Tomas Björk

in Arbitrage Theory in Continuous Time

Published in print:
1998
Published Online:
November 2003
ISBN:
9780198775188
eISBN:
9780191595981
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/0198775180.003.0006
Subject:
Economics and Finance, Financial Economics

In this chapter, the reader is introduced to the Black‐Scholes model and to the basic ideas behind arbitrage pricing of contingent claims. We treat European options, futures, futures options, and ... More


Incomplete Markets

Tomas Björk

in Arbitrage Theory in Continuous Time

Published in print:
1998
Published Online:
November 2003
ISBN:
9780198775188
eISBN:
9780191595981
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/0198775180.003.0010
Subject:
Economics and Finance, Financial Economics

This chapter provides a detailed discussion of the problems surrounding arbitrage pricing in incomplete markets.


Factor Models

Claus Munk

in Financial Asset Pricing Theory

Published in print:
2013
Published Online:
May 2013
ISBN:
9780199585496
eISBN:
9780191751790
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/acprof:oso/9780199585496.003.0010
Subject:
Economics and Finance, Econometrics

The consumption-based asset pricing models are elegant, but tests and applications suffer from the questionable quality of the available consumption data, and at least some of these models are ... More


Valuing Public Policies

Anthony M. Bertelli and Peter John

in Public Policy Investment: Priority-Setting and Conditional Representation In British Statecraft

Published in print:
2013
Published Online:
January 2014
ISBN:
9780199663972
eISBN:
9780191755996
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/acprof:oso/9780199663972.003.0005
Subject:
Political Science, Comparative Politics

The theoretical mechanism by which the public attributes value to the attention of politicians to public policy topics is the subject of this chapter. Drawing on asset pricing theory from the ... More


Short Rate Models

Tomas Björk

in Arbitrage Theory in Continuous Time

Published in print:
1998
Published Online:
November 2003
ISBN:
9780198775188
eISBN:
9780191595981
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/0198775180.003.0016
Subject:
Economics and Finance, Financial Economics

Here, we present the standard theory of arbitrage pricing of interest‐rate‐related claims for short rate models.


Several Underlying Assets

Tomas Björk

in Arbitrage Theory in Continuous Time

Published in print:
1998
Published Online:
November 2003
ISBN:
9780198775188
eISBN:
9780191595981
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/0198775180.003.0009
Subject:
Economics and Finance, Financial Economics

In this chapter, the arbitrage theory from chapter 6 is extended to the case of several underlying risky assets.


Market Liquidity: Theory, Evidence, and Policy

Thierry Foucault, Marco Pagano, and Ailsa Roell

Published in print:
2013
Published Online:
September 2013
ISBN:
9780199936243
eISBN:
9780199333059
Item type:
book
Publisher:
Oxford University Press
DOI:
10.1093/acprof:oso/9780199936243.001.0001
Subject:
Economics and Finance, Financial Economics

The way in which securities are traded is very different from the idealized picture of a frictionless and self-equilibrating market offered by the typical finance textbook. This book offers a more ... More


Dividends

Tomas Björk

in Arbitrage Theory in Continuous Time

Published in print:
1998
Published Online:
November 2003
ISBN:
9780198775188
eISBN:
9780191595981
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/0198775180.003.0011
Subject:
Economics and Finance, Financial Economics

Here, the theory developed earlier is extended to the case of dividend‐paying assets.


Factor Models

Kerry E. Back

in Asset Pricing and Portfolio Choice Theory

Published in print:
2017
Published Online:
May 2017
ISBN:
9780190241148
eISBN:
9780190241179
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/acprof:oso/9780190241148.003.0006
Subject:
Economics and Finance, Financial Economics

The CAPM and factor models in general are explained. Factors can be replaced by the returns or excess returns that are maximally correlated (the projections of the factors). A factor model is ... More


Valuing and Analyzing Fixed Income Derivatives

Koray D. Simsek and Halil Kiymaz

in Debt Markets and Investments

Published in print:
2019
Published Online:
June 2020
ISBN:
9780190877439
eISBN:
9780190877460
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/oso/9780190877439.003.0027
Subject:
Economics and Finance, Financial Economics

Derivatives valuation is based on the key principle of no-arbitrage pricing. This chapter presents valuation models for various types of fixed income derivatives, including forward rate agreements ... More


Stochastic Integrals

Tomas Björk

in Arbitrage Theory in Continuous Time

Published in print:
1998
Published Online:
November 2003
ISBN:
9780198775188
eISBN:
9780191595981
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/0198775180.003.0003
Subject:
Economics and Finance, Financial Economics

This chapter introduces the main technical tool for arbitrage pricing, namely stochastic integrals.


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