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Arbitraging mispriced assets with separation portfolios to lessen total risk

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Author Info
Rodolfo Apreda

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Abstract

This paper expands on a procedure to arbitrage mispriced assets against the benchmark provided by the Security Market Line, but using only separation portfolios to put up a feasible portfolio with the same beta as the mispriced asset and the least total risk among other alternative portfolios. Coming next, such arbitrage is dealt directly with one single separation portfolio, which grants that the total risk linked with the arbitrage portfolio equals the non-systematic risk conveyed by the mispriced asset.

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File URL: http://www.cema.edu.ar/publicaciones/download/documentos/203.pdf
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Publisher Info
Paper provided by Universidad del CEMA in its series CEMA Working Papers: Serie Documentos de Trabajo. with number 203.

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Date of creation: Nov 2001
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Handle: RePEc:cem:doctra:203

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Related research
Keywords: arbitrage portfolios; separation portfolios; total risk; systematic risk;

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Find related papers by JEL classification:
G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Rodolfo Apreda, 2001. "Arbitrage Portfolios," CEMA Working Papers: Serie Documentos de Trabajo. 184, Universidad del CEMA. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Rodolfo Apreda, 2003. "Simple and enlarged separation portfolios. On their Use when Arbitraging and Synthesizing Securities," CEMA Working Papers: Serie Documentos de Trabajo. 233, Universidad del CEMA. [Downloadable!]
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This page was last updated on 2009-12-9.

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