Three Remarks On Asset Pricing

Victor Olkhov

MPRA Paper from University Library of Munich, Germany

Abstract: Asset pricing crucially depends on an averaging time interval Δ of the market trade time-series. The choice of Δ changes the basic pricing equation and determines Taylor series of investor’s utility functions over current and future values of consumption. We present current and future values of random consumption as sums of the mean values during the interval Δ and perturbations determined by random variations of the price at current moment t and the payoff at day t+1. Linear and quadratic Taylor series’ approximations of the basic pricing equation describe mean price, mean payoff, their volatilities, skewness and the amount of asset ξmax that delivers max to investor’s utility. We believe that the stochasticity of the market trade time-series must define the random properties of the price and introduce the new price probability measure entirely determined by the probability measures of trading value and volume. We define the set of nth statistical moments of the price as ratio of the nth statistical moment of the value to nth statistical moment of the volume of the market trades performed during the averaging interval Δ. The set of price statistical moments determines the price characteristic function and its Fourier transform defines the new price probability measure. Prediction of the price probability measure requires forecasts of all statistical moments of the trades. Definition of the price probability expresses the catch phrase “You can’t beat the market”.

Keywords: asset pricing; volatility; price probability; market trades (search for similar items in EconPapers)
JEL-codes: C02 D40 D53 G10 G12 (search for similar items in EconPapers)
Date: 2021-07-24
New Economics Papers: this item is included in nep-cwa, nep-isf and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/109238/8/MPRA_paper_109238.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/118428/1/230829%20 ... 0ASSET%20PRICING.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/119863/1/MPRA_paper_119863.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/110412/1/MPRA_paper_110412.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/121630/1/MPRA_paper_121630.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/114185/1/MPRA_paper_114185.pdf revised version (application/pdf)

Related works:
Working Paper: Three Remarks On Asset Pricing (2024)
Working Paper: Three Remarks On Asset Pricing (2021)
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:pra:mprapa:109238

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().