Asset pricing

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