Arbitrage Pricing Theory (APT) API
Arbitrage Pricing Theory (APT) model implementation.
apt(risk_free_rate, factor_betas, factor_risk_premiums)
Calculate expected return using the Arbitrage Pricing Theory (APT) model.
APT formula: E(R) = Rf + β₁(RP₁) + β₂(RP₂) + ... + βₙ(RPₙ)
Parameters:
| Name | Type | Description | Default |
|---|---|---|---|
risk_free_rate
|
float
|
Risk-free rate of return (e.g., 0.03 for 3%) |
required |
factor_betas
|
list of float
|
Beta coefficients for each factor |
required |
factor_risk_premiums
|
list of float
|
Risk premiums for each factor |
required |
Returns:
| Type | Description |
|---|---|
dict
|
Expected return and components |
Raises:
| Type | Description |
|---|---|
ValueError
|
If number of factor betas does not match number of factor risk premiums If no factors are provided |
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