Asset pricing under information with stochastic volatility

Düring, Bertram (2009) Asset pricing under information with stochastic volatility. Review of Derivatives Research, 12 (2). pp. 141-167. ISSN 1380-6645

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Abstract

Based on a general specification of the asset specific pricing kernel, we develop a pricing model using an information process with stochastic volatility. We derive analytical asset and option pricing formulas. The asset prices in this rational expectations model exhibit crash-like, strong downward movements. The resulting option pricing formula is consistent with the strong negative skewness and high levels of kurtosis observed in empirical studies. Furthermore, we determine credit spreads in a simple structural model.

Item Type: Article
Schools and Departments: School of Mathematical and Physical Sciences > Mathematics
Depositing User: Bertram During
Date Deposited: 06 Feb 2012 18:22
Last Modified: 09 Jul 2012 10:40
URI: http://sro.sussex.ac.uk/id/eprint/16007
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