Intertemporal recursive utility and an equilibrium asset pricing model in the presence of Lévy jumps |
| |
Authors: | Chenghu Ma |
| |
Institution: | Department of Accounting, Finance and Management, University of Essex, CO4 3SQ, UK |
| |
Abstract: | This paper presents an equilibrium formulation of asset pricing in an environment of mixed Poisson–Brownian information with recursive utility. The optimal portfolio choice problem is studied together with a derivation of Euler equation as necessary condition for optimality. It is further shown that the price processes governed by the Euler equation, together with the market clearing conditions, constitute the equilibrium price processes. Closed form formulas are derived for European call options and for other derivative securities in a particular parameterization of the economy. The derived option pricing formula contain many existing models as special cases, and is potentially useful in explaining the moneyness biasedness associated with Black–Scholes model. |
| |
Keywords: | C6 D5 D8 G0 |
本文献已被 ScienceDirect 等数据库收录! |
|