Related papers: Three Remarks On Asset Pricing
The random values and volumes of consecutive trades made at the exchange with shares of security determine its mean, variance, and higher statistical moments. The volume weighted average price (VWAP) is the simplest example of such a…
This paper highlights the hidden dependence of the basic pricing equation of a multi-period consumption-based asset pricing model on price and payoff autocorrelations. We obtain the approximations of the basic pricing equation that describe…
We introduce the price probability measure {\eta}(p;t) that defines the mean price p(1;t), mean square price p(2;t), price volatility {\sigma}p2(t)and all price n-th statistical moments p(n;t) as ratio of sums of n-th degree values C(n;t)…
We describe how the market-based average and volatility of the "actual" return, which the investors gain within their market sales, depend on the statistical moments, volatilities, and correlations of the current and past market trade…
The relationship between price volatilty and a market extremum is examined using a fundamental economics model of supply and demand. By examining randomness through a microeconomic setting, we obtain the implications of randomness in the…
In the information-based approach to asset pricing the market filtration is modelled explicitly as a superposition of signals concerning relevant market factors and independent noise. The rate at which the signal is revealed to the market…
We study a discrete-time consumption-based capital asset pricing model under expectations-based reference-dependent preferences. More precisely, we consider an endowment economy populated by a representative agent who derives utility from…
This paper assesses the link between central bank's policy rate, inflation rate and output gap through Taylor rule equation in both United States and United Kingdom from 1990 to 2020. Also, it analyses the relationship between monetary…
This paper derives the expressions of correlations between prices of two assets, returns of two assets, and price-return correlations of two assets that depend on statistical moments and correlations of the current values, past values, and…
This paper formulates a model of utility for a continuous time framework that captures the decision-maker's concern with ambiguity about both volatility and drift. Corresponding extensions of some basic results in asset pricing theory are…
We analyze the relative price change of assets starting from basic supply/demand considerations subject to arbitrary motivations. The resulting stochastic differential equation has coefficients that are functions of supply and demand. We…
This paper describes the dependence of market-based statistical moments of returns on statistical moments and correlations of the current and past trade values. We use Markowitz's definition of value weighted return of a portfolio as the…
We consider the randomness of market trade as the origin of price and return stochasticity. We look at time series of trade values and volumes as random variables during the averaging interval {\Delta} and describe the dependences of…
In a stochastic volatility framework, we find a general pricing equation for the class of payoffs depending on the terminal value of a market asset and its final quadratic variation. This allows a pricing tool for European-style claims…
We consider economic obstacles that limit the reliability and accuracy of value-at-risk (VaR). Investors who manage large market transactions should take into account the impact of the randomness of large trade volumes on predictions of…
We study a market model in which the volatility of the stock may jump at a random time from a fixed value to another fixed value. This model was already described in the literature. We present a new approach to the problem, based on partial…
This paper studies the links between the descriptions of macroeconomic variables and statistical moments of market trade, price, and return. The randomness of market trade values and volumes during the averaging interval {\Delta} results in…
A new framework for asset price dynamics is introduced in which the concept of noisy information about future cash flows is used to derive the price processes. In this framework an asset is defined by its cash-flow structure. Each cash flow…
Volume weighted average price (VWAP) options are a popular security type in many countries, but despite their popularity very few pricing models have been developed so far for VWAP options. This can be explained by the fact that the VWAP…
We revisit the classical Merton consumption--investment problem when risky-asset returns are modeled by stochastic differential equations interpreted through a general $\alpha$-integral, interpolating between It\^{o}, Stratonovich, and…