All Questions
Tagged with asset-pricing utility
6 questions
3
votes
1
answer
101
views
Proof of utility function for CARA [1(a)] and CRRA equality with power coefficient [1(b)]
I went through the first chapter of Cochrane's Asset pricing and am completely stuck at the first question. I admit that I am an economics idiot, but there is totally no structure to this problem, ...
- 133
4
votes
1
answer
235
views
Nonseparable utility across states of nature: an intuitive example
I am new to nonseparable utility across states of nature as found in some macro-financial models (discussed in this YouTube video lecture by John Cochrane). I do not find the notion intuitive. Could ...
- 2,611
3
votes
3
answers
1k
views
A question about Lagrange multiplier(when $\lambda=0$)
I need help in a maximization problem(finding the optimal investment portfolio).
where $R_s$ and $\Phi$ are $n$ by $1$, with other variables being scalars.
$C^s$ is consumption (or wealth) of an ...
- 131
2
votes
2
answers
799
views
Continuation value versus utility in asset pricing
Is there a difference between continuation value ($V_t$) and utility ($U_t$) except for a possible scaling / difference in units? My question refers to the consumption-based asset pricing literature.
...
- 71
3
votes
1
answer
827
views
Proving that constant absolute risk aversion and relative risk aversion implies independence of initial wealth
I was able to prove that for a portfolio with one risk-free asset and one risky asset, if the Arrow-Pratt measure of absolute risk aversion is constant (i.e., constant absolute risk aversion, CARA), ...
- 145
3
votes
3
answers
227
views
Why do housing and parking cost more in urban than in rural areas, but road access doesn't?
In city centres, land is more expensive than in suburban or rural areas, as land is scarce. Consequentially, housing and parking in cities cost more. However, the same is not true for using the road ...
- 1,754