Asset Pricing Theory ( Princeton Series in Finance )

Publication series ： Princeton Series in Finance

Author： Skiadas Costis  

Publisher： Princeton University Press‎

Publication year： 2009

E-ISBN: 9781400830145

P-ISBN(Paperback): 9780691139852

Subject： F830 Financial, banking theory

Keyword： 财政、金融,经济计划与管理

Language： ENG

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Description

Asset Pricing Theory is an advanced textbook for doctoral students and researchers that offers a modern introduction to the theoretical and methodological foundations of competitive asset pricing. Costis Skiadas develops in depth the fundamentals of arbitrage pricing, mean-variance analysis, equilibrium pricing, and optimal consumption/portfolio choice in discrete settings, but with emphasis on geometric and martingale methods that facilitate an effortless transition to the more advanced continuous-time theory.


Among the book's many innovations are its use of recursive utility as the benchmark representation of dynamic preferences, and an associated theory of equilibrium pricing and optimal portfolio choice that goes beyond the existing literature.



Asset Pricing Theory is complete with extensive exercises at the end of every chapter and comprehensive mathematical appendixes, making this book a self-contained resource for graduate students and academic researchers, as well as mathematically sophisticated practitioners seeking a deeper understanding of concepts and methods on which practical models are built.


  • Covers in depth the modern theoretical foundations of competitive asset pricing and consumption/portfolio choice

  • Uses recursive utility as the benchmark preference representation in dynamic settings

  • Sets the foundations for advanced modeling using geometric arguments and martingale

Chapter

Cover

Title Page

Copyright Page

Table of Contents

Preface

Notation and Conventions

PART ONE: SINGLE-PERIOD ANALYSIS

Chapter One: Financial Market and Arbitrage

1.1 Market and Arbitrage

1.2 Present Value and State Prices

1.3 Market Completeness and Dominant Choice

1.4 Probabilistic Representations of Value

1.5 Financial Contracts and Portfolios

1.6 Returns

1.7 Trading Constraints

1.8 Exercises

1.9 Notes

Chapter Two: Mean-Variance Analysis

2.1 Market and Inner Product Structure

2.2 Minimum-Variance Cash Flows

2.3 Minimum-Variance Returns

2.4 Beta Pricing

2.5 Sharpe Ratios

2.6 Mean-Variance Efficiency

2.7 Factor Pricing

2.8 Exercises

2.9 Notes

Chapter Three: Optimality and Equilibrium

3.1 Preferences, Optimality and State Prices

3.2 Equilibrium

3.3 Effective Market Completeness

3.4 Representative-Agent Pricing

3.4.1 Aggregation Based on Scale Invariance

3.4.2 Aggregation Based on Translation Invariance

3.5 Utility

3.5.1 Compensation Function Construction of Utilities

3.5.2 Additive Utilities

3.6 Utility and Individual Optimality

3.7 Utility and Allocational Optimality

3.8 Exercises

3.9 Notes

Chapter Four: Risk Aversion

4.1 Absolute and Comparative Risk Aversion

4.2 Expected Utility

4.3 Expected Utility and Risk Aversion

4.3.1 Comparative Risk Aversion

4.3.2 Absolute Risk Aversion

4.4 Risk Aversion and Simple Portfolio Choice

4.5 Coefficients of Risk Aversion

4.6 Simple Portfolio Choice for Small Risks

4.7 Stochastic Dominance

4.8 Exercises

4.9 Notes

PART TWO: DISCRETE DYNAMICS

Chapter Five: Dynamic Arbitrage Pricing

5.1 Dynamic Market and Present Value

5.1.1 Time-Zero Market and Present-Value Functions

5.1.2 Dynamic Market and Present-Value Functions

5.2 Financial Contracts

5.2.1 Basic Arbitrage Restrictions and Trading Strategies

5.2.2 Budget Equations and Synthetic Contracts

5.3 Probabilistic Representations of Value

5.3.1 State-Price Densities

5.3.2 Equivalent Martingale Measures

5.4 Dominant Choice and Option Pricing

5.4.1 Dominant Choice

5.4.2 Recursive Value Maximization

5.4.3 Arbitrage Pricing of Options

5.5 State-Price Dynamics

5.6 Market Implementation

5.7 Markovian Pricing

5.8 Exercises

5.9 Notes

Chapter Six: Dynamic Optimality and Equilibrium

6.1 Dynamic Utility

6.2 Expected Discounted Utility

6.3 Recursive Utility

6.4 Basic Properties of Recursive Utility

6.4.1 Comparative Risk Aversion

6.4.2 Utility Gradient Density

6.4.3 Concavity

6.5 Scale/Translation Invariance

6.5.1 Scale-Invariant Kreps-Porteus Utility

6.5.2 Translation-Invariant Kreps-Porteus Utility

6.6 Equilibrium Pricing

6.6.1 Intertemporal Marginal Rate of Substitution

6.6.2 State Pricing with SI Kreps-Porteus Utility

6.6.3 State Pricing with TI Kreps-Porteus Utility

6.7 Optimal Consumption and Portfolio Choice

6.7.1 Generalities

6.7.2 Scale-Invariant Formulation

6.7.3 Translation-Invariant Formulation

6.8 Exercises

6.9 Notes

PART THREE: MATHEMATICAL BACKGROUND

Appendix A: Optimization Principles

A.1 Vector Space

A.2 Inner Product

A.3 Norm

A.4 Continuity

A.5 Compactness

A.6 Projections

A.7 Supporting Hyperplanes

A.8 Global Optimality Conditions

A.9 Local Optimality Conditions

A.10 Exercises

A.11 Notes

Appendix B: Discrete Stochastic Analysis

B.1 Events, Random Variables, Expectation

B.2 Algebras and Measurability

B.3 Conditional Expectation

B.4 Stochastic Independence

B.5 Filtration, Stopping Times and Stochastic Processes

B.6 Martingales

B.7 Predictable Martingale Representation

B.8 Change of Measure and Martingales

B.9 Markov Processes

B.10 Exercises

B.11 Notes

Bibliography

Index