EQUILIBRIUM ASSET RETURNS IN FINANCIAL MARKETS

Dilip B. Madan () and Wim Schoutens
Additional contact information
Dilip B. Madan: Robert H. Smith School of Business, University of Maryland, College Park, 20742 MD, USA
Wim Schoutens: Department of Mathematics, K.U. Leuven, Leuven, Belgium

International Journal of Theoretical and Applied Finance (IJTAF), 2019, vol. 22, issue 02, 1-43

Abstract: Return distributions in the class of pure jump limit laws are observed to reflect numerous asymmetries between the upward and downward motions of asset prices. The return distributions are modeled by self-decomposable parametric laws with all parameters continuously responding to each other. Fixed points of the response functions define equilibrium distributions. The equilibrium distributions that can arise in practice are constrained by the level of return acceptability they may attain. As a consequence, expected returns are equated to risk measured by the cost of purchasing the negative of the centered return. The asymmetries studied include differences in scale, speed, power variation, excitation and cross-excitation.

Keywords: Bilateral gamma; power variation; support vector machine regression; acceptability index (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S0219024918500632
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wsi:ijtafx:v:22:y:2019:i:02:n:s0219024918500632

Ordering information: This journal article can be ordered from

DOI: 10.1142/S0219024918500632

Access Statistics for this article

International Journal of Theoretical and Applied Finance (IJTAF) is currently edited by L P Hughston

More articles in International Journal of Theoretical and Applied Finance (IJTAF) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().