Asset pricing under information with stochastic volatility

Bertram Düring

No 08/04, CoFE Discussion Papers from University of Konstanz, Center of Finance and Econometrics (CoFE)

Abstract: Based on a general specification of the asset speci?c pricing kernel, we develop a pricing model using an information process with stochastic volatility. We derive analytical asset and option pricing formulas. The asset prices in this rational expectations model exhibit crash-like, strong downward movements. The resulting option pricing formula is consistent with the strong negative skewness and high levels of kurtosis observed in empirical studies. Furthermore, we determine credit spreads in a simple structural model.

Keywords: Pricing kernel; stochastic volatility; asset pricing; option pricing; credit spreads (search for similar items in EconPapers)
Date: 2008
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Journal Article: Asset pricing under information with stochastic volatility (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cofedp:0804

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