IDEAS home Printed from https://ideas.repec.org/a/wsi/ijtafx/v11y2008i07ns0219024908005007.html
   My bibliography  Save this article

A Note On The Risk-Premium Process In An Equilibrium

Author

Listed:
  • JUN SEKINE

    (Institute of Economic Research, Kyoto University, Yoshida-Honmachi, Sakyo-ku, Kyoto 606-8501, Japan)

Abstract

Results in He–Leland (1993) are extended and properties of the risk-premium process in an equilibrium are examined in a pure exchange economy with a representative agent: for example, (i) the risk-premium process is characterized by using a martingale representation of the reciprocal of a terminal marginal utility, (ii) it is expressed as a (conditional) expected value including the relative risk aversion coefficient of a terminal utility and the Jacobian matrix process of the state variables, and, (iii) a "mean-reverting" property relates to the monotonic decreasing property of the relative risk aversion coefficient.

Suggested Citation

  • Jun Sekine, 2008. "A Note On The Risk-Premium Process In An Equilibrium," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 11(07), pages 705-716.
    • Handle: RePEc:wsi:ijtafx:v:11:y:2008:i:07:n:s0219024908005007
    DOI: 10.1142/S0219024908005007
    as

    Download full text from publisher

    File URL: http://www.worldscientific.com/doi/abs/10.1142/S0219024908005007
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1142/S0219024908005007?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Paolo Foschi & Andrea Pascucci, 2008. "Path dependent volatility," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 31(1), pages 13-32, May.
    2. Andrea Pascucci & Paolo Foschi, 2005. "Calibration of the Hobson&Rogers model: empirical tests," Finance 0509020, University Library of Munich, Germany.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sekine, Jun, 2008. "Marginal distribution of some path-dependent stochastic volatility model," Statistics & Probability Letters, Elsevier, vol. 78(13), pages 1846-1850, September.
    2. Mauro Rosestolato & Tiziano Vargiolu & Giovanna Villani, 2013. "Robustness for path-dependent volatility models," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 36(2), pages 137-167, November.
    3. Marcel Nutz & Andr'es Riveros Valdevenito, 2023. "On the Guyon-Lekeufack Volatility Model," Papers 2307.01319, arXiv.org, revised Jul 2024.
    4. Reiichiro Kawai, 2009. "Sensitivity Analysis And Density Estimation For The Hobson-Rogers Stochastic Volatility Model," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 12(03), pages 283-295.
    5. Jim Gatheral & Paul Jusselin & Mathieu Rosenbaum, 2020. "The quadratic rough Heston model and the joint S&P 500/VIX smile calibration problem," Papers 2001.01789, arXiv.org.
    6. Andrea Pascucci, 2008. "Free boundary and optimal stopping problems for American Asian options," Finance and Stochastics, Springer, vol. 12(1), pages 21-41, January.
    7. Paolo Foschi & Andrea Pascucci, 2008. "Path dependent volatility," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 31(1), pages 13-32, May.
    8. Ofelia Bonesini & Giorgia Callegaro & Martino Grasselli & Gilles Pag`es, 2023. "From elephant to goldfish (and back): memory in stochastic Volterra processes," Papers 2306.02708, arXiv.org, revised Sep 2023.
    9. Marcel Nutz & Andrés Riveros Valdevenito, 2024. "On the Guyon–Lekeufack volatility model," Finance and Stochastics, Springer, vol. 28(4), pages 1203-1223, October.
    10. Fabio Antonelli & Valentina Prezioso, 2008. "Rate Of Convergence Of Monte Carlo Simulations For The Hobson–Rogers Model," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 11(08), pages 889-904.
    11. Olesia Verchenko, 2011. "Testing option pricing models: complete and incomplete markets," Discussion Papers 38, Kyiv School of Economics.
    12. Jazaerli, Samy & F. Saporito, Yuri, 2017. "Functional Itô calculus, path-dependence and the computation of Greeks," Stochastic Processes and their Applications, Elsevier, vol. 127(12), pages 3997-4028.
    13. Foschi, Paolo & Pascucci, Andrea, 2009. "Calibration of a path-dependent volatility model: Empirical tests," Computational Statistics & Data Analysis, Elsevier, vol. 53(6), pages 2219-2235, April.
    14. Carey, Alexander, 2008. "Natural volatility and option pricing," MPRA Paper 6709, University Library of Munich, Germany.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wsi:ijtafx:v:11:y:2008:i:07:n:s0219024908005007. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tai Tone Lim (email available below). General contact details of provider: http://www.worldscinet.com/ijtaf/ijtaf.shtml .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.