The paper introduces a portfolio-based Keynesian dynamic stochastic general disequilibrium model. It is an endogenous phase-switching macroeconomic model of risky investment where the rational expectation is applied in the financial market with three financial instruments of stocks, credits, and...

By a business-cycle CAPM, we price options. It unifies asset pricing portfolio diversification and option pricing no-arbitrage. We retrieve the American and European option values by intersecting the individual martingale security and the 9-degree multipiece-polynomial portfolio implicit...

We introduce a market, liquidity, credit, and business-cycle risks asset pricing model. Because of the phase-switching business-cycle risks and price-setting monopolistic competition, it has rational expectations and predictability. The unconditional-predicted and observed return volatilities...