Theory of Asset Pricing

ISBN-10: 032112720X
ISBN-13: 9780321127204
Edition: 2008
Authors: George Pennacchi
List price: $164.60
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Description: KEY MESSAGE: Theory of Asset Pricing unifies the central tenets and techniques of asset valuation into a single, comprehensive resource that is ideal for the first PhD course in asset pricing. Single-Period Portfolio Choice and Asset Pricing:  More...

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Book details

List price: $164.60
Copyright year: 2008
Publisher: Addison Wesley
Publication date: 1/31/2007
Binding: Hardcover
Pages: 400
Size: 7.50" wide x 9.00" long x 1.00" tall
Weight: 1.980
Language: English

KEY MESSAGE: Theory of Asset Pricing unifies the central tenets and techniques of asset valuation into a single, comprehensive resource that is ideal for the first PhD course in asset pricing. Single-Period Portfolio Choice and Asset Pricing: Expected Utility and Risk Aversion; Mean-Variance Analysis; CAPM, Arbitrage, and Linear Factor Models; Consumption-Savings and State Pricing; Multiperiod Consumption, Portfolio Choice, and Asset Pricing: A Multiperiod Discrete Time Model of Consupmtion; Multiperiod Market Equilibrium; Contingent Claims Pricing: Basics of Derivative Pricing; Essentials of Diffusion Processes and Ito's Lemma; Dynamic Hedging and PDE Valuation; Arbitrage, Martingales, Pricing Kernels; Mixing Diffusion and Jump Processes; Asset Pricing in Continuous Time: Continuous-Time Consumption and Portfolio Choice; Equilibrium Asset Returns; Time-Inseparable Utility; Additional Topics in Asset Pricing: Behavioral Finance and Asset Pricing; Asset Pricing with Differential Information; Models of the Term Structure of Interest Rates; Models of Default Risk. MESSAGE: For all readers interested in asset valuation.

Single-Period Portfolio Choice and Asset Pricing
Expected Utility and Risk Aversion
Preferences When Returns Are Uncertain
Risk Aversion and Risk Premia
Risk Aversion and Portfolio Choice
Mean-Variance Analysis
Assumptions on Preferences and Asset Returns
Investor Indifference Relations
The Efficient Frontier
A Simple Example
Mathematics of the Efficient Frontier
Portfolio Separation
The Efficient Frontier with a Riskless Asset
An Example with Negative Exponential Utility
An Application to Cross-Hedging
CAPM, Arbitrage, and Linear Factor Models
The Capital Asset Pricing Model
Characteristics of the Tangency Portfolio
Market Equilibrium
Examples of Arbitrage Pricing
Linear Factor Models
Consumption-Savings Decisions and State Pricing
Consumption and Portfolio Choices
An Asset Pricing Interpretation
Real versus Nominal Returns
Risk Premia and the Marginal Utility of Consumption
The Relationship to CAPM
Bounds on Risk Premia
Market Completeness, Arbitrage, and State Pricing
Complete Markets Assumptions
Arbitrage and State Prices
Risk-Neutral Probabilities
State Pricing Extensions
Multiperiod Consumption, Portfolio Choice, and Asset Pricing
A Multiperiod Discrete-Time Model of Consumption and Portfolio Choice
Assumptions and Notation of the Model
The Dynamics of Wealth
Solving the Multiperiod Model
The Final Period Solution
Deriving the Bellman Equation
The General Solution
Example Using Log Utility
Multiperiod Market Equilibrium
Asset Pricing in the Multiperiod Model
The Multiperiod Pricing Kernel
The Lucas Model of Asset Pricing
Including Dividends in Asset Returns
Equating Dividends to Consumption
Asset Pricing Examples
A Lucas Model with Labor Income
Rational Asset Price Bubbles
Examples of Bubble Solutions
The Likelihood of Rational Bubbles
Contingent Claims Pricing
Basics of Derivative Pricing
Forward and Option Contracts
Forward Contracts on Assets Paying Dividends
Basic Characteristics of Option Prices
Binomial Option Pricing
Valuing a One-Period Option
Valuing a Multiperiod Option
Binomial Model Applications
Calibrating the Model
Valuing an American Option
Options on Dividend-Paying Assets
Essentials of Diffusion Processes and Ito's Lemma
Pure Brownian Motion
The Continuous-Time Limit
Diffusion Processes
Definition of an Ito Integral
Functions of Continuous-Time Processes and Ito's Lemma
Geometric Brownian Motion
Kolmogorov Equation
Multivariate Diffusions and Ito's Lemma
Dynamic Hedging and PDE Valuation
Black-Scholes Option Pricing
Portfolio Dynamics in Continuous Time
Black-Scholes Model Assumptions
The Hedge Portfolio
No-Arbitrage Implies a PDE
An Equilibrium Term Structure Model
A Bond Risk Premium
Characteristics of Bond Prices
Option Pricing with Random Interest Rates
Arbitrage, Martingales, and Pricing Kernels
Arbitrage and Martingales
A Change in Probability: Girsanov's Theorem
Money Market Deflator
Feynman-Kac Solution
Arbitrage and Pricing Kernels
Linking the Valuation Methods
The Multivariate Case
Alternative Price Deflators
Continuous Dividends
The Term Structure Revisited
Mixing Diffusion and Jump Processes
Modeling Jumps in Continuous Time
Ito's Lemma for Jump-Diffusion Processes
Valuing Contingent Claims
An Imperfect Hedge
Diversifiable Jump Risk
Lognormal Jump Proportions
Nondiversifiable Jump Risk
Black-Scholes versus Jump-Diffusion Model
Asset Pricing in Continuous Time
Continuous-Time Consumption and Portfolio Choice
Model Assumptions
Continuous-Time Dynamic Programming
Solving the Continuous-Time Problem
Constant Investment Opportunities
Changing Investment Opportunities
The Martingale Approach to Consumption and Portfolio Choice
Market Completeness Assumptions
The Optimal Consumption Plan
The Portfolio Allocation
An Example
Equilibrium Asset Returns
An Intertemporal Capital Asset Pricing Model
Constant Investment Opportunities
Stochastic Investment Opportunities
An Extension to State-Dependent Utility
Breeden's Consumption CAPM
A Cox, Ingersoll, and Ross Production Economy
An Example Using Log Utility
Time-Inseparable Utility
Constantinides' Internal Habit Model
Consumption and Portfolio Choices
Campbell and Cochrane's External Habit Model
Equilibrium Asset Prices
Recursive Utility
A Model by Obstfeld
Discussion of the Model
Additional Topics in Asset Pricing
Behavioral Finance and Asset Pricing
The Effects of Psychological Biases on Asset Prices
Solving the Model
Model Results
The Impact of Irrational Traders on Asset Prices
Solution Technique
Analysis of the Results
Asset Pricing with Differential Information
Equilibrium with Private Information
Grossman Model Assumptions
Individuals'Asset Demands
A Competitive Equilibrium
A Rational Expectations Equilibrium
A Noisy Rational Expectations Equilibrium
Asymmetric Information, Trading, and Markets
Kyle Model Assumptions
Trading and Pricing Strategies
Analysis of the Results
Models of the Term Structure of Interest Rates
Equilibrium Term Structure Models
Affine Models
Quadratic Gaussian Models
Other Equilibrium Models
Valuation Models for Interest Rate Derivatives
Heath-Jarrow-Morton Models
Market Models
Random Field Models
Models of Default Risk
The Structural Approach
The Reduced-Form Approach
A Zero-Recovery Bond
Specifying Recovery Values

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