Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/185742
Authors: 
Beissner, Patrick
Rosazza Gianin, Emanuela
Year of Publication: 
2018
Series/Report no.: 
Discussion Paper No. 72
Abstract: 
Recent empirical studies suggest a downward sloping term structure of Sharpe ratios. We present a theoretical framework in continuous time that can cope with such a non-flat forward curve of risk prices. The approach departs from an arbitrage-free and incomplete market setting when different pricing measures are possible. Involved pricing measures now depend on the time of evaluation or the maturity of payoffs. This results in a time inconsistent pricing scheme. The dynamics can be captured by a time-delayed backward stochastic Volterra integral equation, which to the best of our knowledge, has not yet been studied.
Subjects: 
term structures
sharpe ratio
incomplete markets
asset pricing
time inconsistency
arbitrage
(time-delayed) volterra equations
Document Type: 
Working Paper

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