misc. Flashcards
Conditions for SDF? (iff)
positive SDF iff absence of arbitrage. In general, SDF can be negative under the M=X’[XX’]^-1Q, where Q is the state prices and X are the basis payoffs.
Definition of Absence of Arbitrage
assets with weakly positive payoffs have weakly positive prices, strict with strict.
Theoretically, E[M(R-R_f)]=0 why?
zero cost funding (a forward), pure risk premium
Entropy for log normal distributions
1/2V(logX)
Why is AD security price pinned down by state specific IMRS?
payoff is indicator function, removing the expectations operator
assumptions of SDF payoff space
1) portfolio formation and 2) law of one price
Write down EZ value function (theta not 1)
V_t^{1-\gamma}=[(1-\beta)v(c)^(\theta^-1)+\beta*E[V(W_s)^{1-\gamma}]^(\theta^-1)]^\theta
Definition of cumulant
log E exp(theta X)
Write down EZ value function for psi \rightarrow 1, as theta \rightarrow \infty?
V=(C_0)^(1-\beta)*(E_t[V(W_s)^{1-\gamma}])^{\beta/(1-\gamma)}
asset pricing expected return is:
expected level (which is just risk free, and the negative of the change in marginal utility+jensens, r_f=-E_tm_t+1-1.2V_tm_t+1) plus the covariation terms (driven by -sigma_imt).
Write down the Kyle model
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Write down the econometric setup for the dog that didnt bark
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What is the conclusion of dog that didnt bark (in math)
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Write down the Constantinides Duffie RA vs Heterogeneous SDF result
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Long bond risk premium
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