A New Approach to International Arbitrage Pricing
David A Hsieh and
S Viswanathan ()
Journal of Finance, 1993, vol. 48, issue 5, 1719-47
This paper uses a nonlinear arbitrage-pricing model, a conditional linear model, and an unconditional linear model to price international equities, bonds, and forward currency contracts. Unlike linear models, the nonlinear arbitrage-pricing model requires no restrictions on the payoff space, allowing it to price payoffs of options, forward contracts, and other derivative securities. Only the nonlinear arbitrage-pricing model does an adequate job of explaining the time-series behavior of a cross section of international returns. Copyright 1993 by American Finance Association.
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