Abstract
The purpose of this paper is to use a few simple results of linear algebra to derive some properties of a general asset pricing model. Since one can apply essentially the same techniques in both cases, we start by considering a traditional asset pricing model and then show how to extend the reasoning to a more general model. In order to present our results, we need to state several assumptions that are customarily made in the studies of finance. Unless explicit mention is made, we maintain these assumptions throughout this work although some of them could be relaxed with little effort.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
References
Merton, R.C. (1976): “Option pricing when underlying stock re-turns are discontinuous,” Journal of Financial Economics 3, 125–144.
Merton, R.C. (1990): “Capital market theory and the pricing of financial securities,” Working paper n. 90–024, Harvard Business School (forthcoming in B. Friedman and F. Hahn (eds.), Handbook of monetary economics, North-Holland, Amsterdam).
Protter, P. (1990): Stochastic integration and differential equations, Springer-Verlag, Berlin.
Author information
Authors and Affiliations
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 1993 Physica-Verlag Heidelberg
About this paper
Cite this paper
Castagnoli, E., Li Calzi, M. (1993). Linear Gears for Asset Pricing. In: Flavell, R. (eds) Modelling Reality and Personal Modelling. Contributions to Management Science. Physica, Heidelberg. https://doi.org/10.1007/978-3-642-95900-4_4
Download citation
DOI: https://doi.org/10.1007/978-3-642-95900-4_4
Publisher Name: Physica, Heidelberg
Print ISBN: 978-3-7908-0682-3
Online ISBN: 978-3-642-95900-4
eBook Packages: Springer Book Archive