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Continuous Equilibrium in Affine and Information-Based Capital Asset Pricing Models

Please always quote using this URN:urn:nbn:de:0296-matheon-10003
  • We consider a class of generalized capital asset pricing models in continuous time with a finite number of agents and tradable securities. The securities may not be sufficient to span all sources of uncertainty. If the agents have exponential utility functions and the individual endowments are spanned by the securities, an equilibrium exists and the agents’ optimal trading strategies are constant. Affine processes, and the theory of information-based asset pricing are used to model the endogenous asset price dynamics and the terminal payoff. The derived semi-explicit pricing formulae are applied to numerically analyze the impact of the agents’ risk aversion on the implied volatility of simultaneously-traded European-style options.

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Metadaten
Author:Ulrich Horst, Michael Kupper, Andrea Machrina, Christoph Mainberger
URN:urn:nbn:de:0296-matheon-10003
Referee:Dirk Becherer
Document Type:Preprint, Research Center Matheon
Language:English
Date of first Publication:2012/01/27
Release Date:2012/01/27
Institute:Humboldt-Universität zu Berlin
MSC-Classification:91-XX GAME THEORY, ECONOMICS, SOCIAL AND BEHAVIORAL SCIENCES / 91Bxx Mathematical economics (For econometrics, see 62P20) / 91B50 General equilibrium theory
91-XX GAME THEORY, ECONOMICS, SOCIAL AND BEHAVIORAL SCIENCES / 91Bxx Mathematical economics (For econometrics, see 62P20) / 91B51 Dynamic stochastic general equilibrium theory
Preprint Number:890
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