Asset pricing

This article is about the economic theory. For the corporate finance usage, see Valuation (finance). For the valuation of derivatives and interest rate instruments, see Mathematical finance.
Asset pricing models
Regime

Asset class
 Equilibrium
pricing 		Risk neutral
pricing

Equities

(and foreign exchange and commodities; interest rates for risk neutral pricing)

Bonds, other interest rate instruments

In financial economics, asset pricing refers to a formal treatment and development of two interrelated pricing principles,[1] [2] outlined below, together with the resultant models. There have been many models developed for different situations, but correspondingly, these stem from either general equilibrium asset pricing or rational asset pricing,[3] the latter corresponding to risk neutral pricing.

Investment theory, which is near synonymous, encompasses the body of knowledge used to support the decision-making process of choosing investments,[4][5] and the asset pricing models are then applied in determining the asset-specific required rate of return on the investment in question.

  1. ^ John H. Cochrane (2005). Asset Pricing. Princeton University Press. ISBN 0691121370.
  2. ^ Cite error: The named reference Varian was invoked but never defined (see the help page).
  3. ^ Junhui Qian. "An Introduction to Asset Pricing Theory" (PDF). jhqian.org. Retrieved 2018-12-16.
  4. ^ William N. Goetzmann (2000). An Introduction to Investment Theory (hypertext). Yale School of Management. Archived 2008-08-05 at the Wayback Machine
  5. ^ William F. Sharpe (1999). Macro-Investment Analysis (hypertext). Stanford University