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The fundamental theorem of asset pricing with and without transaction costs

open access: yesMathematical Finance, Volume 35, Issue 2, Page 567-609, April 2025.
Abstract We prove a version of the fundamental theorem of asset pricing (FTAP) in continuous time that is based on the strict no‐arbitrage condition and that is applicable to both frictionless markets and markets with proportional transaction costs. We consider a market with a single risky asset whose ask price process is higher than or equal to its ...
Christoph Kühn
wiley   +1 more source

Factor Models With Sparse Vector Autoregressive Idiosyncratic Components

open access: yesOxford Bulletin of Economics and Statistics, EarlyView.
ABSTRACT We reconcile dense and sparse modelling by exploiting the positive aspects of both. We employ a high‐dimensional, approximate static factor model and assume the idiosyncratic term follows a sparse vector autoregressive model (VAR). The estimation is articulated in two steps: (i) factors and loadings are estimated via principal component ...
Jonas Krampe, Luca Margaritella
wiley   +1 more source

Detecting Multiple Structural Breaks in Systems of Linear Regression Equations With Integrated and Stationary Regressors

open access: yesOxford Bulletin of Economics and Statistics, EarlyView.
ABSTRACT In this paper, we propose a two‐step procedure based on the group LASSO estimator in combination with a backward elimination algorithm to detect multiple structural breaks in linear regressions with multivariate responses. Applying the two‐step estimator, we jointly detect the number and location of structural breaks and provide consistent ...
Karsten Schweikert
wiley   +1 more source

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