[go: up one dir, main page]
More Web Proxy on the site http://driver.im/
IDEAS home Printed from https://ideas.repec.org/p/wpa/wuwpfi/9902001.html
   My bibliography  Save this paper

Virtual Arbitrage Pricing Theory

Author

Listed:
  • Kirill Ilinski

    (University of Birmingham, UK)

Abstract
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 where the virtual arbitrage is absent. Corrections to the Capital Asset Pricing Model (CAPM) are also derived.

Suggested Citation

  • Kirill Ilinski, 1999. "Virtual Arbitrage Pricing Theory," Finance 9902001, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpfi:9902001
    Note: Type of Document - Postscript; prepared on UNIX Sparc TeX; to print on HP; pages: 12
    as

    Download full text from publisher

    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/fin/papers/9902/9902001.ps.gz
    Download Restriction: no
    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/fin/papers/9902/9902001.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Kirill Ilinski & Alexander Stepanenko, 1999. "Derivative pricing with virtual arbitrage," Papers cond-mat/9902046, arXiv.org.
    2. Stephen A. Ross, 2013. "The Arbitrage Theory of Capital Asset Pricing," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 1, pages 11-30, World Scientific Publishing Co. Pte. Ltd..
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Baoqiang Zhan & Shu Zhang & Helen S. Du & Xiaoguang Yang, 2022. "Exploring Statistical Arbitrage Opportunities Using Machine Learning Strategy," Computational Economics, Springer;Society for Computational Economics, vol. 60(3), pages 861-882, October.
    2. Shi, Huai-Long & Zhou, Wei-Xing, 2022. "Factor volatility spillover and its implications on factor premia," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 80(C).
    3. Bonhomme, Stphane & Robin, Jean-Marc, 2009. "Consistent noisy independent component analysis," Journal of Econometrics, Elsevier, vol. 149(1), pages 12-25, April.
    4. Andros Gregoriou & Christos Ioannidis, 2007. "Generalized method of moments and present value tests of the consumption-capital asset pricing model under transactions costs: evidence from the UK stock market," Empirical Economics, Springer, vol. 32(1), pages 19-39, April.
    5. David E. Allen & Michael McAleer & Abhay K. Singh, 2019. "Daily market news sentiment and stock prices," Applied Economics, Taylor & Francis Journals, vol. 51(30), pages 3212-3235, June.
    6. Sellin, Peter, 1998. "Monetary Policy and the Stock Market: Theory and Empirical Evidence," Working Paper Series 72, Sveriges Riksbank (Central Bank of Sweden).
    7. Horst Entorf & Gösta Jamin, 2005. "The dollar and the German stock market: determination of exposure to and pricing of exchange rate risk using APTmodelling," The IUP Journal of Applied Economics, IUP Publications, vol. 0(6), pages 19-33, November.
    8. Pesaran, M. Hashem & Schuermann, Til & Treutler, Bjorn-Jakob & Weiner, Scott M., 2006. "Macroeconomic Dynamics and Credit Risk: A Global Perspective," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(5), pages 1211-1261, August.
    9. Rostagno, Luciano Martin, 2005. "Empirical tests of parametric and non-parametric Value-at-Risk (VaR) and Conditional Value-at-Risk (CVaR) measures for the Brazilian stock market index," ISU General Staff Papers 2005010108000021878, Iowa State University, Department of Economics.
    10. Shaikh, Salman, 2013. "Investment Decisions by Analysts: A Case Study of KSE," MPRA Paper 53802, University Library of Munich, Germany.
    11. John H. Cochrane, 1999. "New facts in finance," Economic Perspectives, Federal Reserve Bank of Chicago, vol. 23(Q III), pages 36-58.
    12. Patrick Gagliardini & Christian Gouriéroux, 2011. "Approximate Derivative Pricing for Large Classes of Homogeneous Assets with Systematic Risk," Journal of Financial Econometrics, Oxford University Press, vol. 9(2), pages 237-280, Spring.
    13. Boes, M.J., 2006. "Index options : Pricing, implied densities and returns," Other publications TiSEM e9ed8a9f-2472-430a-b666-9, Tilburg University, School of Economics and Management.
    14. Gehrig, Thomas & Jackson, Matthew, 1998. "Bid-ask spreads with indirect competition among specialists," Journal of Financial Markets, Elsevier, vol. 1(1), pages 89-119, April.
    15. Veith, Stefan & Werner, Jörg R. & Zimmermann, Jochen, 2009. "Capital market response to emission rights returns: Evidence from the European power sector," Energy Economics, Elsevier, vol. 31(4), pages 605-613, July.
    16. Fernando M. Duarte & Carlo Rosa, 2015. "The equity risk premium: a review of models," Economic Policy Review, Federal Reserve Bank of New York, issue 2, pages 39-57.
    17. Nathan Jensen, 2007. "International institutions and market expectations: Stock price responses to the WTO ruling on the 2002 U.S. steel tariffs," The Review of International Organizations, Springer, vol. 2(3), pages 261-280, September.
    18. Bakalli, Gaetan & Guerrier, Stéphane & Scaillet, Olivier, 2023. "A penalized two-pass regression to predict stock returns with time-varying risk premia," Journal of Econometrics, Elsevier, vol. 237(2).
    19. Arturo Bris & William N. Goetzmann & Ning Zhu, 2007. "Efficiency and the Bear: Short Sales and Markets Around the World," Journal of Finance, American Finance Association, vol. 62(3), pages 1029-1079, June.
    20. Roman Mestre, 2021. "A wavelet approach of investing behaviors and their effects on risk exposures," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 7(1), pages 1-37, December.

    More about this item

    Keywords

    asset pricing; virtual arbitrage;

    JEL classification:

    • G - Financial Economics

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpfi:9902001. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: EconWPA (email available below). General contact details of provider: https://econwpa.ub.uni-muenchen.de .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.