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### 1. Financial decisions and markets : a course in asset pricing[2018]

Book
xxi, 451 pages ; 26 cm
• (source: Nielsen Book Data)9780691160801 20171017
(source: Nielsen Book Data)9780691160801 20171017
FINANCE-620-01

### 2. Asset pricing and portfolio choice theory[2010]

Book
xvi, 487 p. : ill. ; 25 cm.
• Preface -- I Single-Period Models -- 1 Utility Functions and Risk Aversion Coefficients -- 1.1 Uniqueness of Utility Functions -- 1.2 Concavity and Risk Aversion -- 1.3 Coefficients of Risk Aversion -- 1.4 Risk Aversion and Risk Premia -- 1.5 Constant Absolute Risk Aversion -- 1.6 Constant Relative Risk Aversion -- 1.7 Linear Risk Tolerance -- 1.8 Conditioning and Aversion to Noise -- 1.9 Notes and References -- Exercises -- 2 Portfolio Choice and Stochastic Discount Factors -- 2.1 The First-Order Condition -- 2.2 Stochastic Discount Factors -- 2.3 A Single Risky Asset -- 2.4 Linear Risk Tolerance -- 2.5 Multiple Asset CARA-Normal Example -- 2.6 Mean-Variance Preferences -- 2.7 Complete Markets -- 2.8 Beginning-of-Period Consumption -- 2.9 Time-Additive Utility -- 2.10 Notes and References -- Exercises -- 3 Equilibrium and Efficiency -- 3.1 Pareto Optima -- 3.2 Social Planner's Problem -- 3.3 Pareto Optima and Sharing Rules -- 3.4 Competitive Equilibria -- 3.5 Complete Markets -- 3.6 Linear Risk Tolerance -- 3.7 Beginning-of-Period Consumption 1 -- 3.8 Notes and References -- Exercises -- 4 Arbitrage and Stochastic Discount Factors -- 4.1 Fundamental Theorem on Existence of SDF's -- 4.2 Law of One Price and Stochastic Discount Factors -- 4.3 Risk Neutral Probabilities -- 4.4 Projecting SDF's onto the Asset Span -- 4.5 Projecting onto a Constant and the Asset Span -- 4.6 Hansen-Jagannathan Bound with a Risk-Free Asset -- 4.7 Hansen-Jagannathan Bound with No Risk-Free Asset -- 4.8 Hilbert Spaces and Gram-Schmidt Orthogonalization -- 4.9 Notes and References Exercises -- 5 Mean-Variance Analysis -- 5.1 The Calculus Approach -- 5.2 Two-Fund Spanning -- 5.3 The Mean-Standard Deviation Trade-Off -- 5.4 GMV Portfolio and Mean-Variance Efficiency -- 5.5 Calculus Approach with a Risk-Free Asset -- 5.6 Two-Fund Spanning Again -- 5.7 Orthogonal Projections and Frontier Returns -- 5.8 Risk-Free Return Proxies -- 5.9 Inefficiency of ~Rp -- 5.10 Hansen-Jagannathan Bound with a Risk-Free Asset -- 5.11 Frontier Returns and Stochastic Discount Factors -- 5.12 Separating Distributions -- 5.13 Notes and References -- Exercises -- 6 Beta Pricing Models -- 6.1 Beta Pricing -- 6.2 Single-Factor Models with Returns as Factors -- 6.3 The Capital Asset Pricing Model -- 6.4 Returns and Excess Returns as Factors -- 6.5 Projecting Factors on Returns and Excess Returns -- 6.6 Beta Pricing and Stochastic Discount Factors -- 6.7 Arbitrage Pricing Theory -- 6.8 Notes and References -- Exercises -- 7 Representative Investors -- 7.1 Pareto Optimality Implies a Representative Investor -- 7.2 Linear Risk Tolerance -- 7.3 Consumption-Based Asset Pricing -- 7.4 Pricing Options -- 7.5 Notes and References -- Exercises -- II Dynamic Models -- 8 Dynamic Securities Markets -- 8.1 The Portfolio Choice Problem -- 8.2 Stochastic Discount Factor Processes -- 8.3 Self-Financing Wealth Processes -- 8.4 The Martingale Property -- 8.5 Transversality Conditions and Ponzi Schemes -- 8.6 The Euler Equation -- 8.7 Arbitrage and the Law of One Price -- 8.8 Risk Neutral Probabilities -- 8.9 Complete Markets -- 8.10 Portfolio Choice in Complete Markets -- 8.11 Competitive Equilibria -- 8.12 Notes and References -- Exercises -- 9 Portfolio Choice by Dynamic Programming -- 9.1 Introduction to Dynamic Programming -- 9.2 Bellman Equation for Portfolio Choice -- 9.3 The Envelope Condition -- 9.4 Maximizing CRRA Utility of Terminal Wealth -- 9.5 CRRA Utility with Intermediate Consumption -- 9.6 CRRA Utility with an Infinite Horizon -- 9.7 Notes and References -- Exercises -- 10 Conditional Beta Pricing Models -- 10.1 From Conditional to Unconditional Models -- 10.2 The Conditional CAPM -- 10.3 The Consumption-Based CAPM -- 10.4 The Intertemporal CAPM -- 10.5 An Approximate CAPM -- 10.6 Notes and References -- Exercises -- 11 Some Dynamic Equilibrium Models -- 11.1 Representative Investors -- 11.2 Valuing the Market Portfolio -- 11.3 The Risk-Free Return -- 11.4 The Equity Premium Puzzle -- 11.5 The Risk-Free Rate Puzzle -- 11.6 Uninsurable Idiosyncratic Income Risk -- 11.7 External Habits -- 11.8 Notes and References -- Exercises -- 12 Brownian Motion and Stochastic Calculus -- 12.1 Brownian Motion -- 12.2 Quadratic Variation -- 12.3 Ito Integral -- 12.4 Local Martingales and Doubling Strategies -- 12.5 Ito Processes -- 12.6 Asset and Portfolio Returns -- 12.7 Martingale Representation Theorem -- 12.8 Ito's Formula: Version I -- 12.9 Geometric Brownian Motion -- 12.10 Covariations of Ito Processes -- 12.11 Ito's Formula: Version II -- 12.12 Conditional Variances and Covariances -- 12.13 Transformations of Models -- 12.14 Notes and References -- Exercises -- 13 Continuous-Time Securities Markets and SDF Processes -- 13.1 Dividend-Reinvested Asset Prices -- 13.2 Securities Markets -- 13.3 Self-Financing Wealth Processes -- 13.4 Conditional Mean-Variance Frontier -- 13.5 Stochastic Discount Factor Processes -- 13.6 Properties of SDF Processes -- 13.7 Sufficient Conditions for MW to be a Martingale -- 13.8 Valuing Consumption Streams -- 13.9 Risk Neutral Probabilities -- 13.10 Complete Markets -- 13.11 SDF Processes without a Risk-Free Asset -- 13.12 Inflation and Foreign Exchange -- 13.13 Notes and References -- Exercises -- 14 Continuous-Time Portfolio Choice and Beta Pricing -- 14.1 The Static Budget Constraint -- 14.2 Complete Markets -- 12 CONTENTS -- 14.3 Constant Capital Market Line -- 14.4 Dynamic Programming Example -- 14.5 General Markovian Portfolio Choice -- 14.6 The CCAPM -- 14.7 The ICAPM -- 14.8 The CAPM -- 14.9 Infinite-Horizon Dynamic Programming -- 14.10 Dynamic Programming with CRRA Utility -- 14.11 Verification Theorem -- 14.12 Notes and References -- Exercises -- III Derivative Securities -- 15 Option Pricing -- 15.1 Introduction to Options -- 15.2 Put-Call Parity and Option Bounds -- 15.3 SDF Processes -- 15.4 Changes of Measure -- 15.5 Market Completeness -- 15.6 The Black-Scholes Formula -- 15.7 Delta Hedging -- 15.8 The Fundamental PDE -- 15.9 American Options -- 15.10 Smooth Pasting -- 15.11 European Options on Dividend-Paying Assets -- 15.12 Notes and References -- Exercises -- 16 Forwards, Futures, and More Option Pricing -- 16.1 Forward Measures -- 16.2 Forward Contracts -- 16.3 Futures Contracts -- 16.4 Exchange Options -- 16.5 Options on Forwards and Futures -- 16.6 Dividends and Random Interest Rates -- 16.7 Implied Volatilities and Local Volatilities -- 16.8 Stochastic Volatility -- 16.9 Notes and References -- 17 Term Structure Models -- 17.1 Vasicek Model -- 17.2 Cox-Ingersoll-Ross Model -- 17.3 Multi-Factor CIR Models -- 17.4 Affine Models -- 1 -- 17.6 Quadratic Models -- 17.7 Forward Rates -- 17.8 Fitting the Yield Curve -- 17.9 Heath-Jarrow-Morton Models -- 17.10 Notes and References -- Exercises -- IV Topics -- 18 Heterogeneous Priors -- 18.1 State-Dependent Utility Formulation -- 18.2 Representative Investors in Complete Single-Period Markets -- 18.3 Representative Investors in Complete Dynamic Markets -- 18.4 Short Sales Constraints and Biased Prices -- 18.5 Speculative Trade -- 18.6 Notes and References -- Exercises -- 19 Asymmetric Information -- 19.1 The No-Trade Theorem -- 19.2 Normal-Normal Updating -- 19.3 A Fully Revealing Equilibrium -- 19.5 A Model with a Large Number of Investors -- 19.7 The Kyle Model in Continuous Time -- 19.8 Notes and References -- Exercises -- 20 Alternative Preferences in Single-Period Models -- 20.1 The Ellsberg Paradox -- 20.2 The Sure Thing Principle -- 20.3 Multiple Priors and Max-Min Utility -- 20.4 Non-Additive Set Functions -- 20.5 The Allais Paradox -- 20.6 The Independence Axiom -- 20.7 Betweenness Preferences -- 20.8 Rank-Dependent Preferences -- 20.9 First-Order Risk Aversion -- 20.10 Framing and Loss Aversion -- 20.11 Prospect Theory -- 20.12 Notes and References -- Exercises -- 21 Alternative Preferences in Dynamic Models -- 21.1 Recursive Preferences -- 21.2 Portfolio Choice with Epstein-Zin-Weil Utility -- 21.3 A Representative Investor with Epstein-Zin-Weil Utility -- 21.4 Internal Habits -- 21.5 Linear Internal Habits in Complete Markets -- 21.6 A Representative Investor with an Internal Habit -- 21.7 Keeping/Catching Up with the Joneses -- 21.8 Ambiguity Aversion in Dynamic Models -- 21.9 Notes and References -- Exercises -- 22 Production Models -- 22.1 Discrete-Time Model -- 22.2 Marginal q -- 22.3 Costly Reversibility -- 22.4 Project Risk and Firm Risk -- 22.5 Irreversibility and Options -- 22.6 Irreversibility and Perfect Competition -- 22.7 Irreversibility and Risk -- 22.8 Irreversibility and Perfect Competition: An Example -- 22.9 Notes and References -- Exercises -- Appendices -- A Some Probability and Stochastic Process Theory -- A.1 Random Variables -- A.2 Probabilities -- A.3 Distribution Functions and Densities -- A.4 Expectations -- A.5 Convergence of Expectations -- A.6 Interchange of Differentiation and Expectation -- A.7 Random Vectors -- A.8 Conditioning -- A.9 Independence -- A.10 Equivalent Probability Measures -- A.11 Filtrations, Martingales, and Stopping Times -- A.12 Martingales under Equivalent Measures -- A.13 Local Martingales -- A.14 The Usual Conditions -- Notes -- References -- Index.
• (source: Nielsen Book Data)9780195380613 20160619
This book is intended as a textbook for Ph.D. students in finance and as a reference book for academics. It is written at an introductory level but includes detailed proofs and calculations as section appendices. It covers the classical results on single-period, discrete-time, and continuous-time models. It also treats various proposed explanations for the equity premium and risk-free rate puzzles: persistent heterogeneous idiosyncratic risks, internal habits, external habits, and recursive utility. Most of the book assumes rational behavior, but two topics important for behavioral finance are covered: heterogeneous beliefs and non-expected-utility preferences. There are also chapters on asymmetric information and production models. The book includes numerous exercises designed to provide practice with the concepts and also to introduce additional results. Each chapter concludes with a notes and references section that supplies references to additional developments in the field.
(source: Nielsen Book Data)9780195380613 20160619
FINANCE-620-01

### 3. Asset Pricing and Portfolio Choice Theory[2010]

Book
1 online resource (504 pages).
• Preface -- I Single-Period Models -- 1 Utility Functions and Risk Aversion Coefficients -- 1.1 Uniqueness of Utility Functions -- 1.2 Concavity and Risk Aversion -- 1.3 Coefficients of Risk Aversion -- 1.4 Risk Aversion and Risk Premia -- 1.5 Constant Absolute Risk Aversion -- 1.6 Constant Relative Risk Aversion -- 1.7 Linear Risk Tolerance -- 1.8 Conditioning and Aversion to Noise -- 1.9 Notes and References -- Exercises -- 2 Portfolio Choice and Stochastic Discount Factors -- 2.1 The First-Order Condition -- 2.2 Stochastic Discount Factors -- 2.3 A Single Risky Asset -- 2.4 Linear Risk Tolerance -- 2.5 Multiple Asset CARA-Normal Example -- 2.6 Mean-Variance Preferences -- 2.7 Complete Markets -- 2.8 Beginning-of-Period Consumption -- 2.9 Time-Additive Utility -- 2.10 Notes and References -- Exercises -- 3 Equilibrium and Efficiency -- 3.1 Pareto Optima -- 3.2 Social Planner's Problem -- 3.3 Pareto Optima and Sharing Rules -- 3.4 Competitive Equilibria -- 3.5 Complete Markets -- 3.6 Linear Risk Tolerance -- 3.7 Beginning-of-Period Consumption 1 -- 3.8 Notes and References -- Exercises -- 4 Arbitrage and Stochastic Discount Factors -- 4.1 Fundamental Theorem on Existence of SDF's -- 4.2 Law of One Price and Stochastic Discount Factors -- 4.3 Risk Neutral Probabilities -- 4.4 Projecting SDF's onto the Asset Span -- 4.5 Projecting onto a Constant and the Asset Span -- 4.6 Hansen-Jagannathan Bound with a Risk-Free Asset -- 4.7 Hansen-Jagannathan Bound with No Risk-Free Asset -- 4.8 Hilbert Spaces and Gram-Schmidt Orthogonalization -- 4.9 Notes and References Exercises -- 5 Mean-Variance Analysis -- 5.1 The Calculus Approach -- 5.2 Two-Fund Spanning -- 5.3 The Mean-Standard Deviation Trade-Off -- 5.4 GMV Portfolio and Mean-Variance Efficiency -- 5.5 Calculus Approach with a Risk-Free Asset -- 5.6 Two-Fund Spanning Again -- 5.7 Orthogonal Projections and Frontier Returns -- 5.8 Risk-Free Return Proxies -- 5.9 Inefficiency of ~Rp -- 5.10 Hansen-Jagannathan Bound with a Risk-Free Asset -- 5.11 Frontier Returns and Stochastic Discount Factors -- 5.12 Separating Distributions -- 5.13 Notes and References -- Exercises -- 6 Beta Pricing Models -- 6.1 Beta Pricing -- 6.2 Single-Factor Models with Returns as Factors -- 6.3 The Capital Asset Pricing Model -- 6.4 Returns and Excess Returns as Factors -- 6.5 Projecting Factors on Returns and Excess Returns -- 6.6 Beta Pricing and Stochastic Discount Factors -- 6.7 Arbitrage Pricing Theory -- 6.8 Notes and References -- Exercises -- 7 Representative Investors -- 7.1 Pareto Optimality Implies a Representative Investor -- 7.2 Linear Risk Tolerance -- 7.3 Consumption-Based Asset Pricing -- 7.4 Pricing Options -- 7.5 Notes and References -- Exercises -- II Dynamic Models -- 8 Dynamic Securities Markets -- 8.1 The Portfolio Choice Problem -- 8.2 Stochastic Discount Factor Processes -- 8.3 Self-Financing Wealth Processes -- 8.4 The Martingale Property -- 8.5 Transversality Conditions and Ponzi Schemes -- 8.6 The Euler Equation -- 8.7 Arbitrage and the Law of One Price -- 8.8 Risk Neutral Probabilities -- 8.9 Complete Markets -- 8.10 Portfolio Choice in Complete Markets -- 8.11 Competitive Equilibria -- 8.12 Notes and References -- Exercises -- 9 Portfolio Choice by Dynamic Programming -- 9.1 Introduction to Dynamic Programming -- 9.2 Bellman Equation for Portfolio Choice -- 9.3 The Envelope Condition -- 9.4 Maximizing CRRA Utility of Terminal Wealth -- 9.5 CRRA Utility with Intermediate Consumption -- 9.6 CRRA Utility with an Infinite Horizon -- 9.7 Notes and References -- Exercises -- 10 Conditional Beta Pricing Models -- 10.1 From Conditional to Unconditional Models -- 10.2 The Conditional CAPM -- 10.3 The Consumption-Based CAPM -- 10.4 The Intertemporal CAPM -- 10.5 An Approximate CAPM -- 10.6 Notes and References -- Exercises -- 11 Some Dynamic Equilibrium Models -- 11.1 Representative Investors -- 11.2 Valuing the Market Portfolio -- 11.3 The Risk-Free Return -- 11.4 The Equity Premium Puzzle -- 11.5 The Risk-Free Rate Puzzle -- 11.6 Uninsurable Idiosyncratic Income Risk -- 11.7 External Habits -- 11.8 Notes and References -- Exercises -- 12 Brownian Motion and Stochastic Calculus -- 12.1 Brownian Motion -- 12.2 Quadratic Variation -- 12.3 Ito Integral -- 12.4 Local Martingales and Doubling Strategies -- 12.5 Ito Processes -- 12.6 Asset and Portfolio Returns -- 12.7 Martingale Representation Theorem -- 12.8 Ito's Formula: Version I -- 12.9 Geometric Brownian Motion -- 12.10 Covariations of Ito Processes -- 12.11 Ito's Formula: Version II -- 12.12 Conditional Variances and Covariances -- 12.13 Transformations of Models -- 12.14 Notes and References -- Exercises -- 13 Continuous-Time Securities Markets and SDF Processes -- 13.1 Dividend-Reinvested Asset Prices -- 13.2 Securities Markets -- 13.3 Self-Financing Wealth Processes -- 13.4 Conditional Mean-Variance Frontier -- 13.5 Stochastic Discount Factor Processes -- 13.6 Properties of SDF Processes -- 13.7 Sufficient Conditions for MW to be a Martingale -- 13.8 Valuing Consumption Streams -- 13.9 Risk Neutral Probabilities -- 13.10 Complete Markets -- 13.11 SDF Processes without a Risk-Free Asset -- 13.12 Inflation and Foreign Exchange -- 13.13 Notes and References -- Exercises -- 14 Continuous-Time Portfolio Choice and Beta Pricing -- 14.1 The Static Budget Constraint -- 14.2 Complete Markets -- 12 CONTENTS -- 14.3 Constant Capital Market Line -- 14.4 Dynamic Programming Example -- 14.5 General Markovian Portfolio Choice -- 14.6 The CCAPM -- 14.7 The ICAPM -- 14.8 The CAPM -- 14.9 Infinite-Horizon Dynamic Programming -- 14.10 Dynamic Programming with CRRA Utility -- 14.11 Verification Theorem -- 14.12 Notes and References -- Exercises -- III Derivative Securities -- 15 Option Pricing -- 15.1 Introduction to Options -- 15.2 Put-Call Parity and Option Bounds -- 15.3 SDF Processes -- 15.4 Changes of Measure -- 15.5 Market Completeness -- 15.6 The Black-Scholes Formula -- 15.7 Delta Hedging -- 15.8 The Fundamental PDE -- 15.9 American Options -- 15.10 Smooth Pasting -- 15.11 European Options on Dividend-Paying Assets -- 15.12 Notes and References -- Exercises -- 16 Forwards, Futures, and More Option Pricing -- 16.1 Forward Measures -- 16.2 Forward Contracts -- 16.3 Futures Contracts -- 16.4 Exchange Options -- 16.5 Options on Forwards and Futures -- 16.6 Dividends and Random Interest Rates -- 16.7 Implied Volatilities and Local Volatilities -- 16.8 Stochastic Volatility -- 16.9 Notes and References -- 17 Term Structure Models -- 17.1 Vasicek Model -- 17.2 Cox-Ingersoll-Ross Model -- 17.3 Multi-Factor CIR Models -- 17.4 Affine Models -- 1 -- 17.6 Quadratic Models -- 17.7 Forward Rates -- 17.8 Fitting the Yield Curve -- 17.9 Heath-Jarrow-Morton Models -- 17.10 Notes and References -- Exercises -- IV Topics -- 18 Heterogeneous Priors -- 18.1 State-Dependent Utility Formulation -- 18.2 Representative Investors in Complete Single-Period Markets -- 18.3 Representative Investors in Complete Dynamic Markets -- 18.4 Short Sales Constraints and Biased Prices -- 18.5 Speculative Trade -- 18.6 Notes and References -- Exercises -- 19 Asymmetric Information -- 19.1 The No-Trade Theorem -- 19.2 Normal-Normal Updating -- 19.3 A Fully Revealing Equilibrium -- 19.5 A Model with a Large Number of Investors -- 19.7 The Kyle Model in Continuous Time -- 19.8 Notes and References -- Exercises -- 20 Alternative Preferences in Single-Period Models -- 20.1 The Ellsberg Paradox -- 20.2 The Sure Thing Principle -- 20.3 Multiple Priors and Max-Min Utility -- 20.4 Non-Additive Set Functions -- 20.5 The Allais Paradox -- 20.6 The Independence Axiom -- 20.7 Betweenness Preferences -- 20.8 Rank-Dependent Preferences -- 20.9 First-Order Risk Aversion -- 20.10 Framing and Loss Aversion -- 20.11 Prospect Theory -- 20.12 Notes and References -- Exercises -- 21 Alternative Preferences in Dynamic Models -- 21.1 Recursive Preferences -- 21.2 Portfolio Choice with Epstein-Zin-Weil Utility -- 21.3 A Representative Investor with Epstein-Zin-Weil Utility -- 21.4 Internal Habits -- 21.5 Linear Internal Habits in Complete Markets -- 21.6 A Representative Investor with an Internal Habit -- 21.7 Keeping/Catching Up with the Joneses -- 21.8 Ambiguity Aversion in Dynamic Models -- 21.9 Notes and References -- Exercises -- 22 Production Models -- 22.1 Discrete-Time Model -- 22.2 Marginal q -- 22.3 Costly Reversibility -- 22.4 Project Risk and Firm Risk -- 22.5 Irreversibility and Options -- 22.6 Irreversibility and Perfect Competition -- 22.7 Irreversibility and Risk -- 22.8 Irreversibility and Perfect Competition: An Example -- 22.9 Notes and References -- Exercises -- Appendices -- A Some Probability and Stochastic Process Theory -- A.1 Random Variables -- A.2 Probabilities -- A.3 Distribution Functions and Densities -- A.4 Expectations -- A.5 Convergence of Expectations -- A.6 Interchange of Differentiation and Expectation -- A.7 Random Vectors -- A.8 Conditioning -- A.9 Independence -- A.10 Equivalent Probability Measures -- A.11 Filtrations, Martingales, and Stopping Times -- A.12 Martingales under Equivalent Measures -- A.13 Local Martingales -- A.14 The Usual Conditions -- Notes -- References -- Index.
• (source: Nielsen Book Data)9780195380613 20180521
This book is intended as a textbook for Ph.D. students in finance and as a reference book for academics. It is written at an introductory level but includes detailed proofs and calculations as section appendices. It covers the classical results on single-period, discrete-time, and continuous-time models. It also treats various proposed explanations for the equity premium and risk-free rate puzzles: persistent heterogeneous idiosyncratic risks, internal habits, external habits, and recursive utility. Most of the book assumes rational behavior, but two topics important for behavioral finance are covered: heterogeneous beliefs and non-expected-utility preferences. There are also chapters on asymmetric information and production models. The book includes numerous exercises designed to provide practice with the concepts and also to introduce additional results. Each chapter concludes with a notes and references section that supplies references to additional developments in the field.
(source: Nielsen Book Data)9780195380613 20180521
Stanford Libraries
FINANCE-620-01

### 4. Asset pricing[2005]

Book
xvii, 533 p. : ill ; 24 cm.
• Consumption-based model and overview
• Applying the basic model
• Contingent claims markets
• The discount factor
• Mean-variance frontier and beta representations
• Relation between discount factors, betas, and mean-variance frontiers
• Implications of existence and equivalence theorems
• Conditioning information
• Factor pricing models
• GMM in explicit discount factor models
• GMM : general formulas and applications
• Regression-based tests of linear factor models
• GMM for linear factor models in discount factor form
• Maximum likelihood
• Time-series, cross-section, and GMM/DF tests of linear factor models
• Which method?
• Option pricing
• Option pricing without perfect replication
• Term structure of interest rates
• Expected returns in the time series and cross section
• Equity premium puzzle and consumption-based models
• Appendix:
• A.1 Brownian motion
• A.2 Diffusion model
• A.3 Ito's Lemma
Winner of the prestigious Paul A. Samuelson Award for scholarly writing on lifelong financial security, John Cochrane's Asset Pricing now appears in a revised edition that unifies and brings the science of asset pricing up to date for advanced students and professionals. Cochrane traces the pricing of all assets back to a single idea - price equals expected discounted payoff - that captures the macro-economic risks underlying each security's value. By using a single, stochastic discount factor rather than a separate set of tricks for each asset class, Cochrane builds a unified account of modern asset pricing. He presents applications to stocks, bonds, and options. Each model - consumption based, CAPM, multifactor, term structure, and option pricing - is derived as a different specification of the discounted factor. The discount factor framework also leads to a state-space geometry for mean-variance frontiers and asset pricing models. It puts payoffs in different states of nature on the axes rather than mean and variance of return, leading to a new and conveniently linear geometrical representation of asset pricing ideas. Cochrane approaches empirical work with the Generalized Method of Moments, which studies sample average prices and discounted payoffs to determine whether price does equal expected discounted payoff. He translates between the discount factor, GMM, and state-space language and the beta, mean-variance, and regression language common in empirical work and earlier theory. The book also includes a review of recent empirical work on return predictability, value and other puzzles in the cross section, and equity premium puzzles and their resolution. Written to be a summary for academics and professionals as well as a textbook, this book condenses and advances recent scholarship in financial economics.
(source: Nielsen Book Data)9780691121376 20160528
FINANCE-620-01

### 5. Strategic asset allocation : portfolio choice for long-term investors[2002]

Book
xii, 257 p. : ill ; 23 cm.
• 1. Introduction -- 2. Myopic Portfolio Choice -- 3. Who Should Buy Long-Term Bonds? -- 4. Is the Stock Market Safer for Long-Term Investors? -- 5. Strategic Asset Allocation in Continuous Time -- 6. Human Wealth and Financial Wealth -- 7. Investing over the Life Cycle.
• (source: Nielsen Book Data)9780198296942 20170911
(source: Nielsen Book Data)9780198296942 20170911
FINANCE-620-01

### 6. Strategic asset allocation : portfolio choice for long-term investors[2002]

Book
1 online resource.
• 1. Introduction -- 2. Myopic Portfolio Choice -- 3. Who Should Buy Long-Term Bonds? -- 4. Is the Stock Market Safer for Long-Term Investors? -- 5. Strategic Asset Allocation in Continuous Time -- 6. Human Wealth and Financial Wealth -- 7. Investing over the Life Cycle.
• (source: Nielsen Book Data)9780198296942 20170911
(source: Nielsen Book Data)9780198296942 20170911
FINANCE-620-01

### 7. The economics of risk and time[2001]

Book
1 online resource.
• The expected utility model
• Risk aversion
• Change in risk
• The standard portfolio problem
• The equilibrium price risk
• A hyperplane separation theorem
• Log-supermodularity
• Risk aversion with background risk
• The tempering effect of background risk
• Taking multiple risks
• The dynamic investment problem
• Special topics in dynamic finance
• The demand for contingent claims
• Risk on wealth
• Consumption under certainty
• Precautionary saving and prudence
• The equilibrium price of time
• The liquidity constraint
• The saving-portfolio problem
• Disentangling risk and time
• Efficient risk sharing
• The equilibrium price of risk and time
• Searching for the representative agent
• The value of information
• Decision making and information
• Information and equilibrium.
This volume updates and advances the theory of expected utility as applied to risk analysis and financial decision making. Von Neumann and Morgenstern pioneered the use of expected utility theory in the 1940s, but most utility functions used in financial management are still relatively simplistic and assume a mean-variance world. Taking into account advances in the economics of risk and uncertainty, this book focuses on richer applications of expected utility in finance, macroeconomics, and environmental economics. The book consists of 27 chapters and is divided into eight parts. Part I sets up expected utility theory and related concepts. Part II focuses on the standard portfolio problem of choice under uncertainty involving two different assets. Part III introduces the basic hyperplane separation theorem and log-supermodular functions as technical tools for solving various decision-making problems under uncertainty. Part IV analyzes choice involving multiple risks. Part V treats the Arrow-Debreu portfolio problem, while Part VI deals with consumption and saving. Part VII builds on the previous material to determine the equilibrium price of risk and time in an Arrow-Debreu economy, and analyzes how risks are traded. Part VIII focuses on dynamic models of decision-making when a flow of information on future risks is expected over time.
(source: Nielsen Book Data)9780262072151 20170911
This book updates and advances the theory of expected utility as applied to risk analysis and financial decision making. Von Neumann and Morgenstern pioneered the use of expected utility theory in the 1940s, but most utility functions used in financial management are still relatively simplistic and assume a mean-variance world. Taking into account recent advances in the economics of risk and uncertainty, this book focuses on richer applications of expected utility in finance, macroeconomics, and environmental economics.The book covers these topics: expected utility theory and related concepts; the standard portfolio problem of choice under uncertainty involving two different assets; P the basic hyperplane separation theorem and log-supermodular functions as technical tools for solving various decision-making problems under uncertainty; s choice involving multiple risks; the Arrow-Debreu portfolio problem; consumption and saving; the equilibrium price of risk and time in an Arrow-Debreu economy; and dynamic models of decision making when a flow of information on future risks is expected over time. The book is appropriate for both students and professionals. Concepts are presented intuitively as well as formally, and the theory is balanced by empirical considerations. Each chapter concludes with a problem set.
(source: Nielsen Book Data)9780262572248 20170911
FINANCE-620-01

### 8. The economics of risk and time[2001]

Book
xx, 445 pages : illustrations ; 24 cm
• The expected utility model
• Risk aversion
• Change in risk
• The standard portfolio problem
• The equilibrium price risk
• A hyperplane separation theorem
• Log-supermodularity
• Risk aversion with background risk
• The tempering effect of background risk
• Taking multiple risks
• The dynamic investment problem
• Special topics in dynamic finance
• The demand for contingent claims
• Risk on wealth
• Consumption under certainty
• Precautionary saving and prudence
• The equilibrium price of time
• The liquidity constraint
• The saving-portfolio problem
• Disentangling risk and time
• Efficient risk sharing
• The equilibrium price of risk and time
• Searching for the representative agent
• The value of information
• Decision making and information
• Information and equilibrium.
This volume updates and advances the theory of expected utility as applied to risk analysis and financial decision making. Von Neumann and Morgenstern pioneered the use of expected utility theory in the 1940s, but most utility functions used in financial management are still relatively simplistic and assume a mean-variance world. Taking into account advances in the economics of risk and uncertainty, this book focuses on richer applications of expected utility in finance, macroeconomics, and environmental economics. The book consists of 27 chapters and is divided into eight parts. Part I sets up expected utility theory and related concepts. Part II focuses on the standard portfolio problem of choice under uncertainty involving two different assets. Part III introduces the basic hyperplane separation theorem and log-supermodular functions as technical tools for solving various decision-making problems under uncertainty. Part IV analyzes choice involving multiple risks. Part V treats the Arrow-Debreu portfolio problem, while Part VI deals with consumption and saving. Part VII builds on the previous material to determine the equilibrium price of risk and time in an Arrow-Debreu economy, and analyzes how risks are traded. Part VIII focuses on dynamic models of decision-making when a flow of information on future risks is expected over time.
(source: Nielsen Book Data)9780262072151 20170911
This book updates and advances the theory of expected utility as applied to risk analysis and financial decision making. Von Neumann and Morgenstern pioneered the use of expected utility theory in the 1940s, but most utility functions used in financial management are still relatively simplistic and assume a mean-variance world. Taking into account recent advances in the economics of risk and uncertainty, this book focuses on richer applications of expected utility in finance, macroeconomics, and environmental economics.The book covers these topics: expected utility theory and related concepts; the standard portfolio problem of choice under uncertainty involving two different assets; P the basic hyperplane separation theorem and log-supermodular functions as technical tools for solving various decision-making problems under uncertainty; s choice involving multiple risks; the Arrow-Debreu portfolio problem; consumption and saving; the equilibrium price of risk and time in an Arrow-Debreu economy; and dynamic models of decision making when a flow of information on future risks is expected over time. The book is appropriate for both students and professionals. Concepts are presented intuitively as well as formally, and the theory is balanced by empirical considerations. Each chapter concludes with a problem set.
(source: Nielsen Book Data)9780262572248 20170911
FINANCE-620-01

### 9. The econometrics of financial markets[1997]

Book
xviii, 611 p. : ill ; 25 cm.
• List of Figures xiii List of Tables xv Preface xix 1 Introduction 3 1.1 Organization of the Book 4 1.2 Useful Background 6 1.2.1 Mathematics Background 6 1.2.2 Probability and Statistics Background 6 1.2.3 Finance Theory Background 7 1.3 Notation 8 1.4 Prices, Returns, and Compounding 9 1.4.1 Definitions and Conventions 9 1.4.2 The Marginal, Conditional, and Joint Distribution of Returns 13 1.5 Market Efficiency 20 1.5.1 Efficient Markets and the Law of Iterated Expectations 22 1.5.2 Is Market Efficiency Testable? 24 2 The Predictability of Asset Returns 27 2.1 The Random Walk Hypotheses 28 2.1.1 The Random Walk 1: IID Increments 31 2.1.2 The Random Walk 2: Independent Increments 32 2.1.3 The Random Walk 3: Uncorrelated Increments 33 2.2 Tests of Random Walk 1: IID Increments 33 2.2.1 Traditional Statistical Tests 33 2.2.2 Sequences and Reversals, and Runs 34 2.3 Tests of Random Walk 2: Independent Increments 41 2.3.1 Filter Rules 42 2.3.2 Technical Analysis 43 2.4 Tests of Random Walk 3: Uncorrelated Increments 44 2.4.1 Autocorrelation Coefficients 44 2.4.2 Portmanteau Statistics 47 2.4.3 Variance Ratios 48 2.5 Long-Horizon Returns 55 2.5.1 Problems with Long-Horizon Inferences 57 2.6 Tests For Long-Range Dependence 59 2.6.1 Examples of Long-Range Dependence 59 2.6.2 The Hurst-Mandelbrot Rescaled Range Statistic 62 2.7 Unit Root Tests 64 2.8 Recent Empirical Evidence 65 2.8.1 Autocorrelations 66 2.8.2 Variance Ratios 68 2.8.3 Cross-Autocorrelations and Lead-Lag Relations 74 2.8.4 Tests Using Long-Horizon Returns 78 2.9 Conclusion 80 3 Market Microstructure 83 3.1 Nonsynchronous Trading 84 3.1.1 A Model of Nonsynchronous Trading 85 3.1.2 Extensions and Generalizations 98 3.2 The Bid-Ask Spread 99 3.2.1 Bid-Ask Bounce 101 3.2.2 Components of the Bid-Ask Spread 103 3.3 Modeling Transactions Data 107 3.3.1 Motivation 108 3.3.2 Rounding and Barrier Models 114 3.3.3 The Ordered Probit Model 122 3.4 Recent Empirical Findings 128 3.4.1 Nonsynchronous Trading 128 3.4.2 Estimating the Effective Bid-Ask Spread 134 3.4.3 Transactions Data 136 3.5 Conclusion 144 5 The Capital Asset Pricing Model 181 5.1 Review of the CAPM 181 5.2 Results from Efficient-Set Mathematics 184 5.3 Statistical Framework for Estimation and Testing 188 5.3.1 Sharpe-Lintner Version 189 5.3.2 Black Version 196 5.4 Size of Tests 203 5.5 Power of Tests 204 5.6 Nonnormal and Non-IID Returns 208 5.7 Implementation of Tests 211 5.7.1 Summary of Empirical Evidence 211 5.7.2 Illustrative Implementation 212 5.7.3 Unobservability of the Market Portfolio 213 5.8 Cross-Sectional Regressions 215 5.9 Conclusion 217 6 Multifactor Pricing Models 219 6.1 Theoretical Background 219 6.2 Estimation and Testing 222 6.2.1 Portfolios as Factors with a Riskfree Asset 223 6.2.2 Portfolios as Factors without a Riskfree Asset 224 6.2.3 Macroeconomic Variables as Factors 226 6.2.4 Factor Portfolios Spanning the Mean-Variance\protect\\ Frontier 228 6.3 Estimation of Risk Premia and Expected Returns 231 6.4 Selection of Factors 233 6.4.1 Statistical Approaches 233 6.4.2 Number of Factors 238 6.4.3 Theoretical Approaches 239 6.5 Empirical Results 240 6.6 Interpreting Deviations from Exact Factor Pricing 242 6.6.1 Exact Factor Pricing Models, Mean-Variance Analysis, and the Optimal Orthogonal Portfolio 243 6.6.2 Squared Sharpe Ratios 245 6.6.3 Implications for Separating Alternative Theories 246 6.7 Conclusion 251 7 Present-Value Relations 253 7.1 The Relation between Prices, Dividends, and Returns 254 7.1.1 The Linear Present-Value Relation with Constant Expected Returns 255 7.1.2 Rational Bubbles 258 7.1.3 An Approximate Present-Value Relation with Time-Varying Expected Returns 260 7.1.4 Prices and Returns in a Simple Example 264 7.2 Present-Value Relations and US Stock Price Behavior 267 7.2.1 Long-Horizon Regressions 267 7.2.2 Volatility Tests 275 7.2.3 Vector Autoregressive Methods 279 7.3 Conclusion 286 8 Intertemporal Equilibrium Models 291 8.1 The Stochastic Discount Factor 293 8.1.1 Volatility Bounds 296 8.2 Consumption-Based Asset Pricing with Power Utility 304 8.2.1 Power Utility in a Lognormal Model 306 8.2.2 Power Utility and Generalized Method of\protect\\ Moments 314 8.3 Market Frictions 314 8.3.1 Market Frictions and Hansen-Jagannathan\protect\\ Bounds 315 8.3.2 Market Frictions and Aggregate Consumption\protect\\ Data 316 8.4 More General Utility Functions 326 8.4.1 Habit Formation 326 8.4.2 Psychological Models of Preferences 332 8.5 Conclusion 334 9 Derivative Pricing Models 339 9.1 Brownian Motion 341 9.1.1 Constructing Brownian Motion 341 9.1.2 Stochastic Differential Equations 346 9.2 A Brief Review of Derivative Pricing Methods 349 9.2.1 The Black-Scholes and Merton Approach 350 9.2.2 The Martingale Approach 354 9.3 Implementing Parametric Option Pricing Models 355 9.3.1 Parameter Estimation of Asset Price Dynamics 356 9.3.2 Estimating $\sigma$ in the Black-Scholes Model 361 9.3.3 Quantifying the Precision of Option Price Estimators 367 9.3.4 The Effects of Asset Return Predictability 369 9.3.5 Implied Volatility Estimators 377 9.3.6 Stochastic Volatility Models 379 9.4 Pricing Path-Dependent Derivatives Via Monte Carlo Simulation 382 9.4.1 Discrete Versus Continuous Time 383 9.4.2 How Many Simulations to Perform 384 9.4.3 Comparisons with a Closed-Form Solution 384 9.4.4 Computational Efficiency 386 9.4.5 Extensions and Limitations 390 9.5 Conclusion 391 10 Fixed-Income Securities 395 10.1 Basic Concepts 396 10.1.1 Discount Bonds 397 10.1.2 Coupon Bonds 401 10.1.3 Estimating the Zero-Coupon Term Structure 409 10.2 Interpreting the Term Structure of Interest Rates 413 10.2.1 The Expectations Hypothesis 413 10.2.2 Yield Spreads and Interest Rate Forecasts 418 10.3 Conclusion 423 11 Term-Structure Models 427 11.1 Affine-Yield Models 428 11.1.1 A Homoskedastic Single-Factor Model 429 11.1.2 A Square-Root Single-Factor Model 435 11.1.3 A Two-Factor Model 438 11.1.4 Beyond Affine-Yield Models 441 11.2 Fitting Term-Structure Models to the Data 442 11.2.1 Real Bonds, Nominal Bonds, and Inflation 442 11.2.2 Empirical Evidence on Affine-Yield Models 445 11.3 Pricing Fixed-Income Derivative Securities 455 11.3.1 Fitting the Current Term Structure Exactly 456 11.3.2 Forwards and Futures 458 11.3.3 Option Pricing in a Term-Structure Model 461 11.4 Conclusion 464 12 Nonlinearities in Financial Data 467 12.1 Nonlinear Structure in Univariate Time Series 468 12.1.1 Some Parametric Models 470 12.1.2 Univariate Tests for Nonlinear Structure 475 12.2 Models of Changing Volatility 479 12.2.1 Univariate Models 481 12.2.2 Multivariate Models 490 12.2.3 Links between First and Second Moments 494 12.3 Nonparametric Estimation 498 12.3.1 Kernel Regression 500 12.3.2 Optimal Bandwidth Selection 502 12.3.3 Average Derivative Estimators 504 12.3.4 Application: Estimating State-Price Densities 507 12.4 Artificial Neural Networks 512 12.4.1 Multilayer Perceptrons 512 12.4.2 Radial Basis Functions 516 12.4.3 Projection Pursuit Regression 518 12.4.4 Limitations of Learning Networks 518 12.4.5 Application: Learning the Black-Scholes Formula 519 12.5 Overfitting and Data-Snooping 523 12.6 Conclusion 524 Appendix 527 A.1 Linear Instrumental Variables 527 A.2 Generalized Method of Moments 532 A.3 Serially Correlated and Heteroskedastic Errors 534 A.4 GMM and Maximum Likelihood 536 References 541 Author Index 587 Subject Index 597.
• (source: Nielsen Book Data)9780691043012 20160605
The past twenty years have seen an extraordinary growth in the use of quantitative methods in financial markets. Finance professionals now routinely use sophisticated statistical techniques in portfolio management, proprietary trading, risk management, financial consulting, and securities regulation. This graduate-level textbook is intended for PhD students, advanced MBA students, and industry professionals interested in the econometrics of financial modeling. The book covers the entire spectrum of empirical finance, including: the predictability of asset returns, tests of the Random Walk Hypothesis, the microstructure of securities markets, event analysis, the Capital Asset Pricing Model and the Arbitrage Pricing Theory, the term structure of interest rates, dynamic models of economic equilibrium, and nonlinear financial models such as ARCH, neural networks, statistical fractals, and chaos theory. Each chapter develops statistical techniques within the context of a particular financial application. This exciting new text contains a unique and accessible combination of theory and practice, bringing state-of-the-art statistical techniques to the forefront of financial applications. Each chapter also includes a discussion of recent empirical evidence, for example, the rejection of the Random Walk Hypothesis, as well as problems designed to help readers incorporate what they have read into their own applications.
(source: Nielsen Book Data)9780691043012 20160605
FINANCE-620-01

### 10. Microeconomic theory[1995]

Book
xvii, 981 p. : ill ; 26 cm.
• PART I: INDIVIDUAL DECISION-MAKING -- Introduction to Part I -- 1. Preference and Choice -- 2. Consumer Choice -- 3. Classical Demand Theory -- 4. Aggregate Demand -- 5. Production -- 6. Choice under Uncertainty -- PART II: GAME THEORY -- Introduction to Part II -- 7. Chapter 7: Basic Elements of Non-Cooperative Games -- 8. Chapter 8: Simultaneous-Move Games -- 9. Chapter 9: Dynamic Games -- PART III: MARKET EQUILIBRIUM AND MARKET FAILURE -- Introduction to Part III -- 10. Chapter 10: Competitive Markets -- 11. Extrnalities and Public Goods -- 12. Market Power -- 13. Adverse Selection, Signalling, and Screening -- 14. The Principal-Agent Problem -- PART IV: GENERAL EQUILIBRIUM -- Introduction to Part IV -- 15. General Equilibrium Theory: Some Examples -- 16. Equilibrium and its Basic Welfare Properties -- 17. The Positive Theory of Equilibrium -- 18. Some Foundations for Competitive Equilibria -- 19. General Equilibrium under Uncertainty -- 20. Equilibrium and Time -- PART V: WELFARE ECONOMICS AND INCENTIVES -- Introduction to Part V -- 21. Social Choice Theory -- 22. Elements of Welfare Economics and Axiomatic Bargaining -- 23. Incentives and Mechanism Design -- Mathematical Appendix.
• (source: Nielsen Book Data)9780195102680 20160605
Many instructors of microeconomic theory have been waiting for a text that provides balanced and in-depth analysis of the essentials of microeconomics. Masterfully combining the results of years of teaching microeconomics at Harvard, Andreu Mas-Colell, Michael Whinston, and Jerry Green have filled that conspicuous vacancy with their groundbreaking text, Microeconomic Theory. The authors set out to create a solid organizational foundation upon which to build the effective teaching tool for microeconomic theory--the result presents unprecedented depth of coverage in all the essential topics, while allowing professors to "tailor-make" their course to suit personal priorities and style. Topics such as noncooperative game theory, information economics, mechanism design, and general equilibrium under uncertainty receive the attention that reflects their stature within the discipline. The authors devote an entire section to game theory alone, making it "free-standing" to allow instructors to return to it throughout the course when convenient. Discussion is clear, accessible, and engaging, enabling the student to gradually acquire confidence as well as proficiency.Extensive exercises within each chapter help students to hone their skills, while the text's appendix of terms, fully cross-referenced throughout the previous five sections, offers an accessible guide to the subject matter's terminology. Teachers of microeconomics need no longer rely upon scattered lecture notes to supplement their textbooks. Deftly written by three of the field's most influential scholars, Microeconomic Theory brings the readability, comprehensiveness, and versatility to the first-year graduate classroom that has long been missing.
(source: Nielsen Book Data)9780195073409 20160605
This textbook aims to provide a comprehensive overview of the essentials of microeconomics. It offers unprecedented depth of coverage, whilst allowing lecturers to 'tailor-make' their courses to suit personal priorities. Covering topics such as noncooperative game theory, information economics, mechanism design and general equilibrium under uncertainty, it is written in a clear, accessible and engaging style and provides practice exercises and a full appendix of terminology.
(source: Nielsen Book Data)9780195102680 20160605