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Asset pricing
Regime Asset class |
Equilibrium pricing |
Risk neutral pricing |
|---|---|---|
Equities (and foreign exchange and commodities; interest rates for risk neutral pricing) |
||
Bonds, other interest rate instruments |
In financial economics, asset pricing refers to a formal treatment and development of two interrelated pricing principles,[1] [2] outlined below, together with the resultant models. There have been many models developed for different situations, but correspondingly, these stem from either general equilibrium asset pricing or rational asset pricing,[3] the latter corresponding to risk neutral pricing.
Investment theory, which is near synonymous, encompasses the body of knowledge used to support the decision-making process of choosing investments,[4][5] and the asset pricing models are then applied in determining the asset-specific required rate of return on the investment in question, and for hedging.
- ^ John H. Cochrane (2005). Asset Pricing. Princeton University Press. ISBN 0691121370.
- ^ Cite error: The named reference
Varianwas invoked but never defined (see the help page). - ^ Junhui Qian. "An Introduction to Asset Pricing Theory" (PDF). jhqian.org. Retrieved 2018-12-16.
- ^ William N. Goetzmann (2000). An Introduction to Investment Theory (hypertext). Yale School of Management. Archived 2008-08-05 at the Wayback Machine
- ^ William F. Sharpe (1999). Macro-Investment Analysis (hypertext). Stanford University
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