Chapter

ASSET PRICES IN A SINGLE-PERIOD MODEL

Ser-Huang Poon and Richard Stapleton

in Asset Pricing in Discrete Time

Published in print January 2005 | ISBN: 9780199271443
Published online July 2005 | e-ISBN: 9780191602559 | DOI: http://dx.doi.org/10.1093/0199271445.003.0001
ASSET PRICES IN A SINGLE-PERIOD MODEL

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‘Asset Prices in a Single-period Model’ derives asset prices in a one-period model. The authors derive a version of the Capital Asset Pricing Model (CAPM) using a complete market, state-contingent claims approach. They define the forward pricing kernel and then use the assumption of joint normality of the cash flows and Stein's lemma to establish the CAPM. They then derive the pricing kernel in an equilibrium representative investor model.

Keywords: Capital Asset Pricing Model (CAPM); complete market; state-contingent claims; forward pricing kernel; Stein's lemma

Chapter.  5608 words.  Illustrated.

Subjects: Financial Markets

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