State Space Geometry of Asset Pricing: An Introduction

Igor Pozdeev ()

No 1518, Working Papers on Finance from University of St. Gallen, School of Finance

Abstract: This note is aimed at familiarizing the reader with state space geometry, a useful tool in teaching asset pricing concepts. Building on the analogy between expectation and dot product, I visualize basic notions using Euclidean geometry in 2D and 3D. Numerical examples are given such that the reader could easily follow the explanations.

Pages: 22 pages
Date: 2015-08, Revised 2016-03
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