In mathematical finance, multiple factor models are asset pricing models that can be used to estimate the discount rate for the valuation of financial assets. They are generally extensions of the single-factor capital asset pricing model.

What is the purpose of creating a multifactor model?

A multi-factor model is a financial modeling strategy in which multiple factors are used to analyze and explain asset prices. Multi-factor models reveal which factors have the most impact on the price of an asset.

What is a multi index model?

The multi-index model is similar to the single-index model in that the return of each security under consideration is assumed to be a linear function of some index. ... they are only related through common movement with the market index.