Representative Agent Pricing of Financial Assets Based on Lévy Processes with Normal Inverse Gaussian Marginals

Knut Aase

Annals of Operations Research, 2002, vol. 114, issue 1, 15-31

Abstract: The aim of the paper is to test the assumption of normal inverse Gaussian returns from speculative investments. We construct an asset pricing model where price processes are pure jump processes having associated returns with marginal distributions of this particular type. The resulting model is not complete, and we employ a partial equilibrium framework with a representative agent. The model is confronted with some stylized facts, like the equity premium puzzle, and the results seem promising. Copyright Kluwer Academic Publishers 2002

Keywords: partial equilibrium; normal inverse Gaussian distribution; inverse Gaussian distribution; CCAPM; futures contracts; options (search for similar items in EconPapers)
Date: 2002
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DOI: 10.1023/A:1021093615674

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