Time-varying risk premia traditionally have been associated with the empirical fact that conditional second moments are … time-varying. This paper additionally examines another possible source for time-varying risk premia, namely the market … price of risk (lambda). For utility functions that do not imply constant risk aversion measures, the market price of risk …

specify the overall market dynamics, where deflated asset prices appear as martingales. A specific form for the risk premia is … the case of complete and incomplete markets avoiding the use of an equivalent risk neutral measure transformation …. -- financial market modelling ; deflator ; risk premium ; contingent claim pricing ; incomplete market …