Arbitrage Pricing Theory (APT)

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Arbitrage Pricing Theory (APT) is a financial model used to determine the fair market value of an asset by considering multiple macroeconomic factors and their respective risk premiums. Unlike the Capital Asset Pricing Model (CAPM), APT does not rely on a single market index, allowing for more flexibility in asset pricing. It assumes that arbitrage opportunities will be exploited until prices reach equilibrium.

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