Instantaneous Arbitrage and the CAPM/title> <link type="text/css" rel="stylesheet" href="style.css"> <meta http-equiv="Content-Type" content="text/html; charset=iso-8859-1"> <meta name="description" content=" Lars Tyge Nielsen's paper about instantaneous arbitrage and the CAPM "> <meta name="keywords" content=" ">  </head> <body> <TABLE> <TR> <TD class="topcorner"> <div> <h3> Lars Tyge Nielsen's finance site</h3> </div> </TD> <TD class="topmenu"> <div> <a href="index.html">Book</a> <a href="bytopic.html">Papers</a> <a href="aviser.html">Newspaper Articles</a> <a href="resume.html">Resume</a> <a href="mailinglist.html">Mailing List</a> </div> </TD> </TR> <TR> <TD class="leftmenu" valign=top> <div> <h5> Pricing and Hedging of Derivative Securities </h5> <p> <a href="index.html">Description</a> <br> <a href="preface.html">Preface</a> <br> <a href="intro.html">Introduction</a> <br> <a href="toc.html">Table of Contents</a> <br> <a href="ordliste.html">Index</a> <br> <a href="reviews.html">Reviews</a> </div> <div> <p align=center> <a href="http://www.amazon.com/exec/obidos/redirect?path=ASIN/0198776195&link_code=as2&camp=1789&tag=derivativesma-20&creative=9325"><img border="0" src="Images/0198776195.01._SCMZZZZZZZ_.jpg"></a><img src="http://www.assoc-amazon.com/e/ir?t=derivativesma-20&l=as2&o=1&a=0198776195" width="1" height="1" border="0" alt="Pricing and Hedging of Derivative Securities" style="border:none !important; margin:0px !important;" /> <br> Link to amazon.com </p> </div> <div> <h5> Publications </h5> <p> <a href="bytopic.html">Papers and Abstracts</a> <br> <a href="http://ssrn.com/author=21421" target="_blank">SSRN Author Page</a> <br> <a href="http://authors.repec.org/pro/pni31/" target="_blank">RePEc Author Service</a> <br> <a href="index.html">Book</a> <br> <br> <a href="aviser.html">Articles and Interviews in Danish Papers and Radio</a> </div> <div> <h5> Resume </h5> <p> <a href="resume.html">Resume</a> </div> <div> <p align=center> <img SRC="Images/LTN.jpg" ALT="Photo" > </div> <div> <h5> Resources </h5> <p> <a href="http://www.maria-vassalou.com/RELAPA.html" target="_blank"><font color="#FF0000">Rationality in Asset Pricing</a></font> <p> <a href="people.html">People</a> <p> <a href="bookmarks.html">Bookmarks</a> <p> Hedge Funds <br> News <br> New York City <br> New York State <br> US Government <br> Danish Sites <br> Web Tools <br> Miscellaneous <p> <a href="links.html">More Resources</a> </div> <div> <p> <a href="http://www.vilhelmnielsen.dk/" target="_blank">Vilhelm Nielsen</a> </div> </TD> <TD class="stuff" valign=top> <div class="stuff">  <h2>Instantaneous Arbitrage and the CAPM</h2> <center> <p> By Lars Tyge Nielsen <p> May 2006 </center> <h3>Abstract</h3> This paper studies the concept of instantaneous arbitrage in continuous time and its relation to the instantaneous CAPM. Absence of instantaneous arbitrage is equivalent to the existence of a trading strategy which satisfies the CAPM beta pricing relation in place of the market. Thus the difference between the arbitrage argument and the CAPM argument in Black and Scholes (1973) is this: the arbitrage argument assumes that there exists some portfolio satisfying the capm equation, whereas the CAPM argument assumes, in addition, that this portfolio is the market portfolio. <br> </div> </td> </TR> </TABLE> </body> </html>