Mathematics and Economics

Ross Recovery

In Economics, Finance, Mathematics, Uncategorized on January 12, 2016 at 6:09 am

In this post, we discuss the interesting recent paper by Steve Ross,”The Recovery Theorem”, in which a method is proposed to disentangle the risk aversion component from the subjective probability measure from state prices. In particular, a method is proposed to back out the market’s forecast of returns (a distribution over returns) from option prices. Attached is the pdf summary detailing the results.



Bubbles and Crashes: The Local Martingale Characterization of Asset Price Bubbles

In Bubbles and Crashes, Economics, Finance, Mathematics on July 9, 2013 at 2:57 pm

We resume our Bubbles and Crashes series with this post discussing the recent influential works of Robert Jarrow and Phillip Protter on the characterization of bubbles as Local Martingales: The Local Martingale Characterization of Bubbles pdf

CCAPM II: Returns Formulation and the Mean-Variance Frontier

In Asset Pricing Reading Group, Economics, Finance on March 29, 2011 at 1:58 am

Due to technical issues on getting our figure and latex to display and compile on wordpress, we will temporarily include a pdf version of this post: CAPM II: Returns & MVF. We hope to resolve this issue and post in our usual format soon.