Olkhov, Victor (2021): Three Remarks On Asset Pricing.
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Abstract
We consider the time interval Δ during which the market trade timeseries are averaged as the key factor of the consumptionbased assetpricing model that causes modification of the basic pricing equation. The duration of Δ determines Taylor series of investor’s utility over current and future values of consumption. We present consumption at current and future moments as sums of their mean values and perturbations during Δ of the price at current moment t and perturbations of the payoff at day t+1. For linear and quadratic Taylor series approximations of the basic equation we obtain new relations on mean price, mean payoff, their volatilities, skewness and amount of asset ξmax that delivers max to investor’s utility. The stochasticity of market trade timeseries defines random properties of the asset price timeseries during Δ. We introduce new marketbased price probability measure entirely determined by frequencybased probability measures of the market trade value and volume. The conventional frequencybased price probability is a very special case of the marketbased price probability measure when all trade volumes during Δ equal unit. Prediction of the marketbased price probability at horizon T equals forecast of the market trade value and volume probabilities at same horizon. The similar Taylor series and probability measures alike to marketbased price probability can be used as approximations of different versions of asset pricing, financial and economic models that describe relations between economic and financial variables averaged during some time interval Δ.
Item Type:  MPRA Paper 

Original Title:  Three Remarks On Asset Pricing 
English Title:  Three Remarks On Asset Pricing 
Language:  English 
Keywords:  asset pricing, volatility, price probability, market trades 
Subjects:  C  Mathematical and Quantitative Methods > C0  General > C02  Mathematical Methods D  Microeconomics > D4  Market Structure, Pricing, and Design > D40  General D  Microeconomics > D5  General Equilibrium and Disequilibrium > D53  Financial Markets G  Financial Economics > G1  General Financial Markets > G10  General G  Financial Economics > G1  General Financial Markets > G12  Asset Pricing ; Trading Volume ; Bond Interest Rates 
Item ID:  110412 
Depositing User:  Victor Olkhov 
Date Deposited:  01 Nov 2021 03:30 
Last Modified:  01 Nov 2021 03:30 
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URI:  https://mpra.ub.unimuenchen.de/id/eprint/110412 