The Term Structure of Sharpe Ratios and Arbitrage-Free Asset Pricing in Continuous Time

Arbeitspapier

Recent empirical studies suggest a downward sloping term structure of Sharpe ratios. We present a theoretical framework in continuous time that can cope with such a non-flat forward curve of risk prices. The approach departs from an arbitrage-free and incomplete market setting when different pricing measures are possible. Involved pricing measures now depend on the time of evaluation or the maturity of payoffs. This results in a time inconsistent pricing scheme. The dynamics can be captured by a time-delayed backward stochastic Volterra integral equation, which to the best of our knowledge, has not yet been studied.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Discussion Paper ; No. 72

Klassifikation und Themen

• Klassifikation: Wirtschaft
• Thema: term structures ; sharpe ratio ; incomplete markets ; asset pricing ; time inconsistency ; arbitrage ; (time-delayed) volterra equations

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Beissner, Patrick ; Rosazza Gianin, Emanuela
• Ereignis: Veröffentlichung
• (wer): Ludwig-Maximilians-Universität München und Humboldt-Universität zu Berlin, Collaborative Research Center Transregio 190 - Rationality and Competition
• (wo): München und Berlin
• (wann): 2018

Weitere Informationen

• Handle: http://hdl.handle.net/10419/185742
• Letzte Aktualisierung: 10.03.2025, 11:44 MEZ