Basis Assets, Multiple-Factor Beta Models, and Systematic Risk

Robert Jarrow ()

Chapter Chapter 4 in Continuous-Time Asset Pricing Theory, 2021, pp 91-107 from Springer

Abstract: Abstract This chapter studies basis assets, the multiple-factor beta model, and characterizes systematic risk. This is done for an incomplete market where asset prices can have discontinuous sample paths. Multiple-factor beta models are used for active portfolio management and the determination of positive alphas trading strategies. These models can be derived using only the Third Fundamental Theorem 16 of asset pricing in Chap. 2 . A special case of this chapter is Ross’s APT, which illustrates the notion of portfolio diversification. This chapter is based on Jarrow and Protter (Math Financial Econom 10:29–48, 2016).

Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprfcp:978-3-030-74410-6_4

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DOI: 10.1007/978-3-030-74410-6_4

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