State Space Geometry of Asset Pricing: An Introduction

22 Pages Posted: 26 Aug 2015 Last revised: 9 Mar 2016

See all articles by Igor Pozdeev

Igor Pozdeev

New York University Stern School of Business; University of Saint Gallen, School of Finance

Date Written: March 8, 2016

Abstract

This note is aimed at familiarizing the reader with state space geometry, a useful tool in teaching asset pricing concepts. Building on the analogy between expectation and dot product, I visualize basic notions using Euclidean geometry in 2D and 3D. Numerical examples are given such that the reader could easily follow the explanations.

Keywords: asset pricing, state space geometry, projection

JEL Classification: G12

Suggested Citation

Pozdeev, Igor, State Space Geometry of Asset Pricing: An Introduction (March 8, 2016). Available at SSRN: https://ssrn.com/abstract=2650167 or http://dx.doi.org/10.2139/ssrn.2650167

Igor Pozdeev (Contact Author)

New York University Stern School of Business ( email )

44 West 4th Street
Suite 9-160
New York, NY NY 10012
United States

University of Saint Gallen, School of Finance ( email )

Rosenbergstrasse 52
St.Gallen, CH-9000
Switzerland

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