The paper uses a Walrasian two-period financial market model with informed and uninformed constant absolute risk averse … (CARA) rational investors and noise traders. The investors allocate their initial wealth between risky assets and risk …’ prediction coefficient but makes that of the uninformed investors diminish. Inflation does not affect rational investors’ risk …

-- 20 The State Variables Model and the Valuation Partial Differential Equation -- Part 3 Portfolio Theory and Portfolio … Asset Pricing Model -- 23 Arbitrage Pricing Theory and Multi-Factor Models -- 24 Strategic Portfolio Allocation -- 25 …, hybrids and credit derivatives), portfolio theory and management, and risk assessment and hedging of individual positions as …

of risk premia if and only if volatility is stochastic. Our model can thus justify the recent empirical results on the …We study general equilibrium asset prices in a multi-period endowment economy when agents' risk aversion is allowed to … depend on the maturity of the risk. We find horizon-dependent riskaversion preferences generate a decreasing term structure …

In this paper, we consider a new corporate bond-pricing model with credit-rating migration risks and a stochastic … interest rate. In the new model, the criterion for rating change is based on a predetermined ratio of the corporation’s total … volatility of the bond is also assumed to depend on the interest rate. This new model improves the previous existing bond models …