Open Lecture "Arbitrage Pricing Models"

Author: Dr. Yuri Tserlukevich (Arizona State University)
Topic: Arbitrage Pricing Models
Date and time: July 28, 16:00 - 18:00
Place: IPM Business School
Working language: English.

The arbitrage pricing theory (APT) describes the price where a mispriced asset is expected to be. It is often viewed as an alternative to the capital asset pricing model (CAPM), since the APT has more flexible assumption requirements. Whereas the CAPM formula requires the market's expected return, APT uses the risky asset's expected return and the risk premium of a number of macro-economic factors. Arbitrageurs use the APT model to profit by taking advantage of mispriced securities. A mispriced security will have a price that differs from the theoretical price predicted by the model. By going short an over priced security, while concurrently going long the portfolio the APT calculations were based on, the arbitrageur is in a position to make a theoretically risk-free profit.

After the lecture interested students had the opportunity to get information on applying and studying at a PhD program at Arizona State University.