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The Necessity of No Asymptotic Arbitrage in APT Pricing

In: Recent Developments In Mathematical Finance

Author

Listed:
  • Xiaoai Lin
  • Xia Liu
  • Yeneng Sun

Abstract

A typical APT type formula states that the square of the deviations of the individual rates of return from a factor-pricing formula sum to a finite number. The assumption of no asymptotic arbitrage is, in general, sufficient but not necessary for such an APT type formula to hold. Under certain additional assumptions on the residual risks, the desired necessity result can be obtained for a market with a countably infinite or an uncountably infinite number of assets.

Suggested Citation

  • Xiaoai Lin & Xia Liu & Yeneng Sun, 2001. "The Necessity of No Asymptotic Arbitrage in APT Pricing," World Scientific Book Chapters, in: Jiongmin Yong (ed.), Recent Developments In Mathematical Finance, chapter 15, pages 181-189, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789812799579_0015
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