7-days of FREE Audio papers, translation & more with Prime
7-days of FREE Prime access
7-days of FREE Audio papers, translation & more with Prime
7-days of FREE Prime access
https://doi.org/10.1080/14697688.2021.2020887
Copy DOIJournal: Quantitative Finance | Publication Date: Feb 8, 2022 |
Citations: 2 |
We derive a simple robust single-factor market model under statistical ambiguity that uses relative entropy as the ambiguity index constraining the multiple priors set. We also discuss theoretically the validity of relative entropy to measure model discrepancy and detect misspecification. The premium on both risk and ambiguity in our model would set a bound on stock prices that investors can use as a ‘margin of safety’ against extreme market events.
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.