Formulate the k-factor beta model and show on excel

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July 21st 2012, 06:06 AM
Helpmeplease1

Formulate the k-factor beta model and show on excel

So I have an equation

$(\mu_i(t)-r_t)dt=\sum^K_{k=1}\beta_{ik}(t)(\mu_{X_k}(t)-r_t)dt$

where

$\beta_{ik}(t)=\frac{\frac{d<S_i,X_k>_t}{S_i(t)X_k( t)}}{\frac{d<X_k,X_k>_t}{X_k(t)^2}}$
July 21st 2012, 07:34 AM
Helpmeplease1

Re: Formulate the k-factor beta model and show on excel

Is it just the formula for the arbitrage pricing theory?

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