Investors in equilibrium are modeled as facing investor specific risks across the space of assets. Personalized asset pricing models reflect these risks. Averaging across the pool of investors we obtain a market asset pricing model that reflects market risk exposures. It is observed on invoking...

The estimation of systematic risk (or 'beta') in central to the implementation of the Capital Asset Pricing Model and the market model for both researchers and practioners. It is well known that a variety of beta estimates can result for the one stock dependeng on various factors such as the...

We study the consumption based asset pricing model in a discrete time pure exchange setting with incomplete information. Incomplete information leads to a filtering problem which agents solve using the Kalman filter. We characterize the solution to the asset pricing problem in such a setting....

This paper presents a unified framework for examining the general equilibrium effects of transactions costs and trading constraints on security market trades and prices. The model uses a discrete time/state framework and Kuhn-Tucker theory to characterize the optimal decisions of consumers and...

We study the consumption based asset pricing model in a discrete-time pure exchange setting with incomplete information. Incomplete information leads to a filtering problem which agents solve using the Kalman filter. We characterize the solution to the asset pricing problem in such a setting....

Most central banks effect changes to their target or policy rate in discrete increments (e.g., multiples of 0.25%) following public announcements on scheduled dates. Still, for most applications, researchers rely on the assumption that the policy rate changes linearly with economic conditions...

We show that an unbounded number of consumption dates is necessary to support an asset pricing bubble. We work in a continuous-time model where the number of trade dates is infinite but the number of consumption dates is flexible and can be chosen to be uniformly bounded, finite almost surely,...

This paper presents a simple framework for the use of traditional capital budgeting models and the valuation of several real options in the presence of shadow costs of incomplete information. Information costs can be viewed as sunk costs in the spirit of Merton’s (1987) model of capital market...

We show that Australian options are equivalent to fixed or floating strike Asian options and consequently that by studying Asian options from the Australian perspective and vice versa, much can be gained. One specific application of this “Australian approach” leads to a natural dimension...