General Equilibrium Stock Index Futures Pricing Allowing for Event Risk

Simon H. Yen and Jai Jen Wang
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Simon H. Yen: Department of Finance, National Chengchi University, Taiwan
Jai Jen Wang: Department of Finance, Feng Chia University, Taiwan

International Journal of Business and Economics, 2007, vol. 6, issue 2, 103-119

Abstract: This study develops a new futures pricing model and derives its analytic solution. Comparative static and simulation results are also presented. Under this general equilibrium framework, we find that bounded degrees of state variables in the broad economy determine co-varying extents among various important market variables. However, increasing event risk, including the sizes of occurrence probability and corresponding impulse effects, makes their analysis intractable.

Keywords: general equilibrium model; event risk; intertemporal futures pricing (search for similar items in EconPapers)
JEL-codes: D52 G13 (search for similar items in EconPapers)
Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:ijb:journl:v:6:y:2007:i:2:p:103-119

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