A new approach to the derivation of asset price bounds

Arbeitspapier

In a two-period setup we develop a generalization of good-deal bounds that allows to include in the problem the implications of asset pricing models. Our basis is the distance behind Hansen and Jagannathan's measure of model misspecification since a volatility constraint on the stochastic discount factor is a particular case of a restriction on this distance. We also present an alternative approach which mostly retains the economic interpretation underlying the above extension and it has a very useful property since the resulting bounds can be computed by simply solving a linear program.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: SSE/EFI Working Paper Series in Economics and Finance ; No. 448

Classification and Topics

• Classification: Wirtschaft ; Computational Techniques; Simulation Modeling ; Asset Pricing; Trading Volume; Bond Interest Rates
• Subject: generalized good-deal bounds ; L1-norm methods

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Longarela, Iñaki R.
• Event: Veröffentlichung
• (who): Stockholm School of Economics, The Economic Research Institute (EFI)
• (where): Stockholm
• (when): 2001

Further information

• Handle: http://hdl.handle.net/10419/56366
• Last update: 10.03.2025, 11:41 AM CET