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Home > QFINANCE Dictionary > Definition of arbitrage pricing theory

Definition of

arbitrage pricing theory

Markets

model used for assessing return and risk a model of financial instrument and portfolio behavior that provides a benchmark of return and risk for capital budgeting and securities analysis. It can be used to create portfolios that track a market index, estimate the risk of an asset allocation strategy, or estimate the response of a portfolio to economic developments.

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    Creator of the arbitrage pricing theory 1965 Received BS in Physics from CalTech. 1970 Received PhD in Economics from Harvard University. 1976 Appointed Professor of Economics and Finance at Yale School of Management. 1979 Developed the Cox–Ross–Rubinstein model. 1985 Developed the Cox

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    to that borrowed by the levered company. In either case, the return on investment would be identical. Thus, the price of the levered company must be the same as the price of the unlevered company minus the borrowed sum of money, which is the value of the levered company’s debt. There is an implicit assumption

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Definitions of ’arbitrage pricing theory’ and meaning of ’arbitrage pricing theory’ are from the book publication, QFINANCE – The Ultimate Resource, © 2009 Bloomsbury Information Ltd. Find definitions for ’arbitrage pricing theory’ and other financial terms with our online QFINANCE Financial Dictionary.

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