Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/24435
Authors: 
Lüders, Erik
Peisl, Bernhard
Year of Publication: 
2001
Series/Report no.: 
ZEW Discussion Papers 01-15
Abstract: 
Asset price processes are completely described by information processes and investors´ preferences. In this paper we derive the relationship between the process of investors´ expectations of the terminal stock price and asset prices in a general continous time pricing kernel framework. To derive the asset price process we make use of the modern technique of forward-backward stochastic differential equations. With this approach it is possible to show the driving factors for stochastic volatility of asset prices and to give theoretical arguments for empirically well documented facts. We show that stylized facts that look at first hand like financial market anomalies may be explained by an information process with stochastic volatility.
Subjects: 
backward stochastik differential equtations
information processes
pricing kernel
JEL: 
C69
G12
Document Type: 
Working Paper

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