Risk Price Dynamics

52 Pages Posted: 17 Nov 2009 Last revised: 15 May 2023

See all articles by Jaroslav Borovička

Jaroslav Borovička

New York University (NYU) - Department of Economics; National Bureau of Economic Research (NBER)

Lars Peter Hansen

University of Chicago - Department of Economics; National Bureau of Economic Research (NBER)

Mark Hendricks

University of Chicago - Department of Economics

José A. Scheinkman

Columbia University; Princeton University - Department of Economics; National Bureau of Economic Research (NBER)

Multiple version iconThere are 3 versions of this paper

Date Written: November 2009

Abstract

We present a novel approach to depicting asset pricing dynamics by characterizing shock exposures and prices for alternative investment horizons. We quantify the shock exposures in terms of elasticities that measure the impact of a current shock on future cash-flow growth. The elasticities are designed to accommodate nonlinearities in the stochastic evolution modeled as a Markov process. Stochastic growth in the underlying macroeconomy and stochastic discounting in the representation of asset values are central ingredients in our investigation. We provide elasticity calculations in a series of examples featuring consumption externalities, recursive utility, and jump risk.

Suggested Citation

Borovička, Jaroslav and Hansen, Lars Peter and Hendricks, Mark and Scheinkman, José, Risk Price Dynamics (November 2009). NBER Working Paper No. w15506, Available at SSRN: https://ssrn.com/abstract=1506317

Jaroslav Borovička

New York University (NYU) - Department of Economics ( email )

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National Bureau of Economic Research (NBER) ( email )

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Lars Peter Hansen (Contact Author)

University of Chicago - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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Mark Hendricks

University of Chicago - Department of Economics ( email )

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José Scheinkman

Columbia University ( email )

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Princeton University - Department of Economics ( email )

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609-258-4020 (Phone)
609-258-6419 (Fax)

HOME PAGE: http://www.princeton.edu/~joses

National Bureau of Economic Research (NBER) ( email )

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