Log-normality and arbitrage free bounds on the distribution range of zero-coupon pure discount bond returns

Article Abstract:

A new method of modeling the intertemporal price behavior of zero-coupon pure discount bonds in the return distributions of these securities is introduced. The log-normal model of the return distribution, called the bounded distribution model (BDM), includes the arbitrage free bounds on the range of the return distribution. Using Treasury Bill data, the BDM is found to be superior to an unbounded distribution model since it meets the general conditions of the log-normal distribution and demonstrates relatively stable parameter estimates over time.

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Arbitrage pricing theory and the investment horizon

Article Abstract:

Results of previous studies on the investment horizon, specifically on the Capital Assets Pricing model (CAPM), can be applied to the Arbitrage Pricing Theory (APT). Given a certain set of assumptions, both the return generating process of assets and the APT are shown to be affected by intervaling. Controversy had earlier surrounded the empirical applications of APT, which, because of its simple assumptions, has been seen as the best alternative to CAPM.

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Arbitrage, risk premium, and cointegration tests of the efficiency of futures markets

Article Abstract:

A cointegration framework is used to provide a new perspective on the efficiency of futures markets.

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