Horst, U;
Kupper, M;
Macrina, A;
Mainberger, C;
(2013)
Continuous equilibrium in affine and information-based capital asset pricing models.
Annals of Finance
, 9
(4)
725- 755.
10.1007/s10436-012-0216-z.
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Abstract
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.
| Type: | Article |
|---|---|
| Title: | Continuous equilibrium in affine and information-based capital asset pricing models |
| Open access status: | An open access version is available from UCL Discovery |
| DOI: | 10.1007/s10436-012-0216-z |
| Publisher version: | http://dx.doi.org/10.1007/s10436-012-0216-z |
| Language: | English |
| Additional information: | "The final publication is available at Springer via http://dx.doi.org/10.1007/s10436-012-0216-z” 24 pages, 4 figures |
| UCL classification: | UCL UCL > Provost and Vice Provost Offices UCL > Provost and Vice Provost Offices > UCL BEAMS UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Maths and Physical Sciences UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Maths and Physical Sciences > Dept of Mathematics |
| URI: | https://discovery.ucl.ac.uk/id/eprint/1376803 |
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