Continuous equilibrium in affine and information-based capital asset pricing models
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Publication:470686
DOI10.1007/S10436-012-0216-ZzbMATH Open1298.91090arXiv1201.1840OpenAlexW2153039997MaRDI QIDQ470686FDOQ470686
Andrea Macrina, Michael Kupper, Christoph Mainberger, Ulrich Horst
Publication date: 12 November 2014
Published in: Annals of Finance (Search for Journal in Brave)
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.
Full work available at URL: https://arxiv.org/abs/1201.1840
CAPMimplied volatilityexponential utilityaffine processescontinuous-time equilibriuminformation-based asset pricing
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Cited In (1)
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