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Asset pricing under information with stochastic volatility
journal contribution
posted on 2023-06-07, 19:45 authored by Bertram DueringBased 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.
History
Publication status
- Published
Journal
Review of Derivatives ResearchISSN
1380-6645Publisher
University of KonstanzExternal DOI
Issue
2Volume
12Page range
141-167Department affiliated with
- Mathematics Publications
Full text available
- No
Peer reviewed?
- Yes
Legacy Posted Date
2012-02-06Usage metrics
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