A probability-free and continuous-time explanation of the equity premium and CAPM

Abstract

This paper gives yet another definition of game-theoretic probability in the context of continuous-time idealized financial markets. Without making any probabilistic assumptions (but assuming positive and continuous price paths), we obtain a simple expression for the equity premium and derive a version of the capital asset pricing model.

arXiv comment21 pages, 1 figure

References in corpus (2)

• The efficient index hypothesis and its implications in the BSM model
• A simplified Capital Asset Pricing Model