Risk Price Dynamics

Journal of Financial Econometrics, Forthcoming

67 Pages Posted: 23 May 2019

See all articles by Jaroslav Borovička

Jaroslav Borovička

New York University (NYU) - Department of Economics; National Bureau of Economic Research (NBER)

Lars Peter Hansen

University of Chicago - Department of Economics; National Bureau of Economic Research (NBER)

Mark Hendricks

University of Chicago - Department of Economics

José Scheinkman

Columbia University; Princeton University - Department of Economics; National Bureau of Economic Research (NBER)

Multiple version iconThere are 3 versions of this paper

Date Written: July 13, 2010

Abstract

We present a novel approach to depicting asset pricing dynamics by characterizing shock exposures and prices for alternative investment horizons. We quantify the shock exposures in terms of elasticities that measure the impact of a current shock on future cash-flow growth. The elasticities are designed to accommodate nonlinearities in the stochastic evolution modeled as a Markov process. Stochastic growth in the underlying macroeconomy and stochastic discounting in the representation of asset values are central ingredients in our investigation. We provide elasticity calculations in a series of examples featuring consumption externalities, recursive utility, and jump risk.

Keywords: growth-rate risk, pricing, dynamics, elasticities, Markov process

JEL Classification: C52, E44, G12

Suggested Citation

Borovička, Jaroslav and Hansen, Lars Peter and Hendricks, Mark and Scheinkman, José, Risk Price Dynamics (July 13, 2010). Journal of Financial Econometrics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3377381

Jaroslav Borovička (Contact Author)

New York University (NYU) - Department of Economics ( email )

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National Bureau of Economic Research (NBER) ( email )

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Lars Peter Hansen

University of Chicago - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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Mark Hendricks

University of Chicago - Department of Economics ( email )

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José Scheinkman

Columbia University ( email )

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New York, NY 10027
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Princeton University - Department of Economics ( email )

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Princeton, NJ 08544
United States
609-258-4020 (Phone)
609-258-6419 (Fax)

HOME PAGE: http://www.princeton.edu/~joses

National Bureau of Economic Research (NBER)

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