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Capm and Apt Like Models with Risk Measures


Capm and Apt Like Models with Risk Measures

Balbás, Alejandro and Balbás, Beatriz and Balbás, Raquel (2009) Capm and Apt Like Models with Risk Measures. Technical Report. Concordia University. Department of Mathematics & Statistics, Montreal, Quebec.

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The paper deals with optimal portfolio choice problems when risk levels are given by coherent risk measures, expectation bounded risk measures or general deviations. Both static and dynamic pricing models may be involved.
Unbounded problems are characterized by new notions such as compatibility and strong compatibility between pricing rules and risk measures. Surprisingly, it is
pointed out that the lack of bounded optimal risk and/or return levels arises in practice for very important pricing models (for instance, the Black and Scholes model)
and risk measures (V aR, CV aR, absolute deviation and downside semi-deviation, etc.).

Bounded problems will present a Market Price of Risk and generate a pair of benchmarks. From these benchmarks we will introduce APT and CAPM like analyses, in the sense that the level of correlation between every available security and some economic factors will expalin the security expected return. On the contray, the risk level non correlated with these factors will have no influence on any return, despite we are dealing with very general risk functions that are beyond the standard deviation.

Divisions:Concordia University > Faculty of Arts and Science > Mathematics and Statistics
Item Type:Monograph (Technical Report)
Authors:Balbás, Alejandro and Balbás, Beatriz and Balbás, Raquel
Series Name:Department of Mathematics & Statistics. Technical Report No. 1/09
Corporate Authors:Concordia University. Department of Mathematics & Statistics
Institution:Concordia University
Date:June 2009
Keywords:Risk Measure, Compatibility between Prices and Risks, Efficient Portfolio, APT and CAPM like models
ID Code:6721
Deposited On:23 Jun 2010 14:48
Last Modified:04 Nov 2016 22:59


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