Chapter

A Review of General Asset Pricing Theory

Claus Munk

in Fixed Income Modelling

Published in print June 2011 | ISBN: 9780199575084
Published online September 2011 | e-ISBN: 9780191728648 | DOI: http://dx.doi.org/10.1093/acprof:oso/9780199575084.003.0004
A Review of General Asset Pricing Theory

Show Summary Details

Preview

The pricing of fixed income securities follows the same general principles as the pricing of all other financial assets. This chapter explains some important general concepts and results in asset pricing theory that are applied in the rest of the book to the term structure of interest rate and the pricing of fixed income securities. The fundamental concepts discussed are arbitrage, state prices, risk-neutral probability measures, market prices of risk, market completeness, and representative agents. For the popular class of diffusion models, asset prices are shown to satisfy certain partial differential equations.

Keywords: arbitrage; state price deflator; risk-neutral probability; asset pricing; market price of risk; market completeness; representative agent; partial differential equation

Chapter.  18633 words. 

Subjects: Financial Markets

Full text: subscription required

How to subscribe Recommend to my Librarian

Buy this work at Oxford University Press »

Users without a subscription are not able to see the full content. Please, subscribe or login to access all content.