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Vector norms and multiple assets

Clem

Joined
8/3/14
Messages
4
Points
11
Hi everybody,

I'm currently dealing with modelling an economy as a continuum of states. The absence of arbitrage will guarantee the existence of a state price density. However, how should we best model a single state price in the face of multiple assets?

Let's assume k is our market price of risk as a vector, is it better to use mean(k) or norm(k)?

Best
 
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