Olkhov, Victor (2022): Three Remarks On Asset Pricing.
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Abstract
We consider wellknown consumptionbased asset pricing theory and regard the choice of the time interval Δ used for averaging the market price timeseries as the key factor of asset pricing. We show that the explicit usage of the averaging interval Δ allows expand investor’s utility into Taylor series and derive successive approximations of the basic asset pricing equation. For linear and quadratic Taylor series approximations of the basic pricing equation we derive new expressions of the mean price, mean payoff, their volatilities, skewness and amount of asset ξmax that delivers max to investor’s utility. The treatment of the market price as a coefficient between the trade value and volume prohibits independent definition of the trade value, volume and price probabilities. We introduce price nth statistical moments p(t;n) as generalization of the wellknown definition of volume weighted average price (VWAP). We demonstrate that usage of VWAP causes zero correlations between price and trade volume. Usage of price nth statistical moments causes zero correlations between nth power of price pn and trade volume Un, but don’t causes statistical independence. As example, we derive expression for correlation between price p and squares of trade volume U2. Any predictions of the marketbased price probability at horizon T should match forecasts of finite number of nth statistical moments of the trade value C(t;n) and volume U(t;n) at the same horizon T. The new definition of the marketbased asset price probability emphasizes its direct dependence on random properties of the market trade.
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:  114185 
Depositing User:  Victor Olkhov 
Date Deposited:  15 Aug 2022 00:17 
Last Modified:  15 Aug 2022 00:17 
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URI:  https://mpra.ub.unimuenchen.de/id/eprint/114185 
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