Questions tagged [asset-pricing]
The branch of Finance that studies and models how specific assets (such as options, bonds and stocks) are priced.
186 questions
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Beginner question about Option pricing, Risk and Rational portfolios
I'm a physics student currently reading "Econophysics and Physical Economics by Peter Richmond, J¨urgen Mimkes, and Stefan Hutzler" for the first time and this is my first touch with the ...
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how the number of 31 for the relative risk aversion (γ ) is deduced in the paper "Lazy investors, discretionary consumption ..." (2007)?
In the paper:
Jagannathan, Ravi, and Yong Wang. "Lazy investors, discretionary consumption, and the cross‐section of stock returns." The Journal of Finance 62.4 (2007): 1623-1661.
on page 21 ...
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Derivation of Black-Scholes Equation
This question is about the Wikipedia page on February 20, 2025. The page has since been edited.
In the derivation of the Black-Scholes Equation on Wikipedia, they consider a portfolio $\Pi$ consisting ...
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Proof of utility function for CARA [1(a)] and CRRA equality with power coefficient [1(b)]
I went through the first chapter of Cochrane's Asset pricing and am completely stuck at the first question. I admit that I am an economics idiot, but there is totally no structure to this problem, ...
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Stock price equation Nakamura and Steinsson (2018a)
I am in the process of deriving all equations in the DSGE model of Nakamura and Steinsson (2018a). So far, everything is derived correctly, but when I had a look into the replication files (https://...
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Flow budget constraint in a paper by Garleanu and Panageas
I am reading this paper and got confused by Equation (6) in said paper. Suppose there is an investor that can trade in riskless bonds that pay interest rate $r_t$, and holds a market portfolio with ...
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Can we use the utility of discounted flows to do asset pricing?
Is it possible to do asset pricing by using the expected utility of the present value of all future discounted cash flows ? I aim to use this utility function to define an optimal portfolio, but I ...
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Connection between pricing kernels and kernel methods in linear algebra
I'm trying to understand the idea of pricing kernels.
I have a maths/computer science background so I understand that kernel methods map information from "data" space into high-dimensional &...
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Difference in difference on election impact on asset prices?
I am looking to research the impact of Brexit on the FTSE100 index.
FTSE100 is an stock index of the 100 largest UK companies. The UK also has FTSE250 which is an index of 250 mid-cap companies (not ...
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Put Call Parity Question - Calculating Risk free rate ; has my professor left something out or is it possible?
You buy a share of stock, write a 1-year call on the stock with strike price of $90,
and buy a 1-year put option with the same strike. The cost of this three-instrument
portfolio is $86.53. The stock ...
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Why does S&P 500 have a P/E Multiple of ca. 25 while other indexes (for ex. DAX) around 16?
I was thinking about a topic for my bachelor´s thesis and came across an interesting thing: P/E and other multiples of S&P500 were higher than those of other markets. Is there any research on this ...
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Why is the portfolio weight of the risk-free asset capped at 1?
I am reading Investment Science by David Luenberger, and in it he creates a portfolio with a risk-free asset and a risky asset. α is the weight of the risk-free asset, and he sets α ≤ 1. Why is that?
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Finding the market portfolio in a two-asset market under CAPM
I'm working on an unassessed course problem,
Consider a market with risk-free return $5\%$ and two risky investment $A$ and $B$. We are given the following data: \begin{matrix}
\text{Investment} &...
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Is there a type financial instrument that can realistically increase its value 100 fold
Is there a type of financial instrument with extreme volatility, which could realistically grow in value by 10 000% over less than a year? If there isn't one that's commonly traded, could I craft one ...
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Price discrepancy between the same company's stock on two exchanges
The graph shows a company's stock prices on two exchanges: New York Stock Exchange (NYSE) and Oslo Stock Exchange (OSE). Since these prices are denominated in different currencies, the NYSE price is ...
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