We propose a method for constructing an arbitrage-free multi-asset pricing model which is consistent with a set of observed single- and multi-asset derivative prices. The pricing model is constructed as a random mixture of N reference models, where the distribution of mixture weights is obtained...

In this paper, we formally show that the cross-sectional variance of stock returns is a consistent and asymptotically efficient estimator for aggregate idiosyncratic volatility. This measure has two key advantages: it is model-free and observable at any frequency. Previous approaches have used...