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Solving Asset Pricing Models When the Price-Dividend Function is Analytic

Stefano Athanasoulis

出版	SSRN, 2003
URL	http://books.google.com.hk/books?id=lX3GzgEACAAJ&hl=&source=gbs_api

註釋

We construct a new method to solve for asset pricing models when the price-dividend function is analytic. Our method is to assume the price-dividend function is analytic and then to derive a set of conditions that proves the price-dividend function is analytic. We describe the general method and then solve for two specific asset-pricing models within the paper. We then use the solution to the asset pricing equations to price an European call option, the Samp;P 500 index option, to show the applicability of the methodology. While we apply this methodology to asset pricing, its application is more general and can be applied to any Euler equation when the policy function is analytic. In order to make the methodology operational, we describe how one can use these methods without proving analyticity for the particular case the researcher may be interested in. The user will be able to input the intertemporal marginal rate of substitution, and solve for the price-dividend function and have well defined measures that the solution is accurate.