Podcast
Questions and Answers
What is the conceptual view that incorporates all risk correlations for any asset?
What is the conceptual view that incorporates all risk correlations for any asset?
- A change of measure
- A single (random) variable Mt+1 to discount payoffs with (correct)
- A Marginal rate of substitution
- A complete set of competitive markets
What is the formula for the payoff of an asset in multiple periods?
What is the formula for the payoff of an asset in multiple periods?
- Pi,t = Et [Mt+1 (Di,t+1 - Pi,t+1 )]
- Pi,t = Et [Mt+1 (Di,t+1 + Pi,t+1 )] (correct)
- Pi,t = Et [Mt+1 /(Di,t+1 + Pi,t+1 )]
- Pi,t = Et [Mt+1 (Di,t+1 * Pi,t+1 )]
What is the price of the Arrow security that pays $1 if state s occurs at time t+1 and zero otherwise?
What is the price of the Arrow security that pays $1 if state s occurs at time t+1 and zero otherwise?
- πs,t+1
- Xs,t+1
- Ps,t,t+1 (correct)
- Ms,t+1
What is the implication of the equation Pi,t = Et [Mt+1 Xt+1 ]?
What is the implication of the equation Pi,t = Et [Mt+1 Xt+1 ]?
What is the Modigliani-Miller theorem?
What is the Modigliani-Miller theorem?
Why doesn't the capital structure of a firm affect its value?
Why doesn't the capital structure of a firm affect its value?
Under what condition does the Modigliani-Miller theorem hold?
Under what condition does the Modigliani-Miller theorem hold?
Does hedging a risk raise the value of a firm?
Does hedging a risk raise the value of a firm?
What is the primary concern of consumption-based asset pricing?
What is the primary concern of consumption-based asset pricing?
What is the purpose of the Consumption Euler equation?
What is the purpose of the Consumption Euler equation?
What is the return on an asset defined as?
What is the return on an asset defined as?
What is the stochastic discount factor?
What is the stochastic discount factor?
What is the fundamental equation of consumption-based asset pricing?
What is the fundamental equation of consumption-based asset pricing?
What is the role of the stochastic discount factor in consumption-based asset pricing?
What is the role of the stochastic discount factor in consumption-based asset pricing?
What is the relationship between the stochastic discount factor and the standard discount factor?
What is the relationship between the stochastic discount factor and the standard discount factor?
What is the purpose of the two perspectives in the Consumption Euler equation?
What is the purpose of the two perspectives in the Consumption Euler equation?
What is the main difference between the geometric and arithmetic returns in the context of asset pricing?
What is the main difference between the geometric and arithmetic returns in the context of asset pricing?
What is the approximate standard deviation of the annual real return on stocks?
What is the approximate standard deviation of the annual real return on stocks?
What is the relationship between the log of expected gross return and the expected net return?
What is the relationship between the log of expected gross return and the expected net return?
What is the assumption about the representative agent's preferences in the Mehra-Prescott 1985 model?
What is the assumption about the representative agent's preferences in the Mehra-Prescott 1985 model?
What is the equation for the equity premium in the Mehra-Prescott 1985 model?
What is the equation for the equity premium in the Mehra-Prescott 1985 model?
What is the nature of the consumption process in the endowment economy of the Mehra-Prescott 1985 model?
What is the nature of the consumption process in the endowment economy of the Mehra-Prescott 1985 model?
What is the equation for the risk-free rate in the Mehra-Prescott 1985 model?
What is the equation for the risk-free rate in the Mehra-Prescott 1985 model?
What is the main objective of the Mehra-Prescott 1985 model?
What is the main objective of the Mehra-Prescott 1985 model?
Which vector represents the state of the world in the future?
Which vector represents the state of the world in the future?
What does the expression $Pt imes Xt+1$ represent?
What does the expression $Pt imes Xt+1$ represent?
According to Modigliani-Miller theorem, what remains unchanged when a firm purchases another cashflow?
According to Modigliani-Miller theorem, what remains unchanged when a firm purchases another cashflow?
What kind of research do Ketchup Economists focus on?
What kind of research do Ketchup Economists focus on?
What does CRRA stand for in the context of utility functions?
What does CRRA stand for in the context of utility functions?
What is the equation for relative risk aversion in the given context?
What is the equation for relative risk aversion in the given context?
Two quart-sized ketchup bottles invariably sell for what price according to Ketchup Economists?
Two quart-sized ketchup bottles invariably sell for what price according to Ketchup Economists?
In portfolio choice, how is the fraction allocated to a risky asset determined?
In portfolio choice, how is the fraction allocated to a risky asset determined?
What does $eta$ represent in the context of the power utility function?
What does $eta$ represent in the context of the power utility function?
In the context of consumption-based asset pricing, what does the term $1/Et[M_{t+1}]$ represent?
In the context of consumption-based asset pricing, what does the term $1/Et[M_{t+1}]$ represent?
How is the intertemporal elasticity of substitution related to $ ext{γ}$ in the power utility function?
How is the intertemporal elasticity of substitution related to $ ext{γ}$ in the power utility function?
In risk adjustments, when is an asset considered a hedge?
In risk adjustments, when is an asset considered a hedge?
Which term represents precautionary savings in the risk-free rate equation?
Which term represents precautionary savings in the risk-free rate equation?
According to the equity premium formula, what does the covariance term represent?
According to the equity premium formula, what does the covariance term represent?
What is implied when the return on an asset is negatively correlated with $M_{t+1}$?
What is implied when the return on an asset is negatively correlated with $M_{t+1}$?
What does the expression $P_{i,t} = rac{E[X_{i,t+1}]}{R_{f,t}} + ext{cov}t(M{t+1}, X_{i,t+1})$ describe?
What does the expression $P_{i,t} = rac{E[X_{i,t+1}]}{R_{f,t}} + ext{cov}t(M{t+1}, X_{i,t+1})$ describe?
Which condition under power utility indicates an asset is a hedge?
Which condition under power utility indicates an asset is a hedge?
What term is added to the equity premium formula to account for the log-normal assumption?
What term is added to the equity premium formula to account for the log-normal assumption?
