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Persistent link: https://www.econbiz.de/10009217820
The paper presents some security market pricing results in the setting of a security market equilibrium in continuous time. The theme of the paper is financial valuation theory when the primitive assets pay out real dividends represented by processes of unbounded variation. In continuous time,...
Persistent link: https://www.econbiz.de/10008609872
In the canonical model of investments, the optimal fractions in the risky assets do not depend on the time horizon. This is against empirical evidence, and against the typical recommendations of portfolio managers. We demonstrate that if the intertemporal coefficient of relative risk aversion is...
Persistent link: https://www.econbiz.de/10008577778
Both the equilibrium interest rate and the equity premium, as well as risk premiums of risky investments are all important quantities in cost-benefit analyses. In the light of the current (2008 -) financial crisis, it is of interest to study models that connect the the financial sector with the...
Persistent link: https://www.econbiz.de/10008853954
This paper develops several results in the modern theory of contingent claims valuation in a frictionless security market with continuous trading. The price model is a semi-martingale with a certain structure, making the return of the security a sum of an Ito-process and a random, marked point...
Persistent link: https://www.econbiz.de/10008872693
We study a competitive equilibrium in a production economy, i.e., a system of prices at which firms’ profit maximizing production decisions and individuals’ preferred affordable consumption choices equate supply and demand in every market. We derive the equilibrium price of the firm and the...
Persistent link: https://www.econbiz.de/10008838963
Motivated by the problems of the conventional model in rationalizing market data, we derive the equilibrium interest rate and risk premiums using recursive utility in a continuous time model. Two ordinally equivalent versions are considered. The state price is not Markov in any of the versions,...
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