Consumption-Based CAPM and Option Pricing under Jump-Diffusion Uncertainty

Arbeitspapier

In Kusuda [45], we developed equilibrium analysis in security market economy with jump-Wiener information where no finite number of securities can complete markets. Assuming approximately complete markets (Björk et al. [11] [12]) in which a continuum of bonds are traded and any contingent claim can be replicated with an arbitrary precision, we have shown sufficient conditions for the existence of approximate security market equilibrium, in which every agent is allowed to choose any consumption plan that can be supported with any prescribed precision. In this paper, we derive the Consumption-Based Capital Asset Pricing Model (CCAPM) using the framework in case of heterogeneous with additively separable utilities (ASUs) and of homogeneous agents with a common stochastic differential utility (SDU). The CCAPM says that the risk premium between a risky security and the nominal-risk-free security can be decomposed into two groups of terms. One is related to the price uctuation of the risky security, and the other is related to that of commodity. Each group can be further decomposed into two terms related to consumption volatility and consumption jump in case of ASUs, and into three terms related to consumption volatility, continuation utility volatility, and jumps of consumption and continuation utility in case of SDU. Next, we present a general equilibrium framework of jump-diffusion option pricing models in each case of heterogeneous agents with CRRA utilities and of homogeneous agents with a common Kreps-Porteus utility. Finally, we construct a general equilibrium version of an affine jump-diffusion model with jump-diffusion volatility for option pricing using the framework.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Discussion Paper ; No. 317

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Computational Techniques; Simulation Modeling ; Portfolio Choice; Investment Decisions ; Contingent Pricing; Futures Pricing; option pricing ; Optimization Techniques; Programming Models; Dynamic Analysis ; Computable and Other Applied General Equilibrium Models ; Exchange and Production Economies
• Thema: Capital Asset Pricing Model ; Optionspreistheorie ; Statistische Verteilung

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Kusuda, Koji
• Ereignis: Veröffentlichung
• (wer): University of Minnesota, Center for Economic Research
• (wo): Minneapolis, MN
• (wann): 2003

Weitere Informationen

• Handle: http://hdl.handle.net/10419/23495
• Letzte Aktualisierung: 10.03.2025, 11:45 MEZ