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Pricing growth-rate risk
2010
Finance and Stochastics
We characterize the compensation demanded by investors in equilibrium for incremental exposure to growth-rate risk. Given an underlying Markov diffusion that governs the state variables in the economy, the economic model implies a stochastic discount factor process S and a reference stochastic growth process G for the macroeconomy. Both are modeled conveniently as multiplicative functionals of a multidimensional Brownian motion. To study pricing we consider the pricing implications of
doi:10.1007/s00780-010-0141-9
fatcat:uvevbkpsjndynj33heebzkvgxi