A Model for Pricing Stocks and Bonds

Topics:
Investment and Capital Markets
Tags:
Bond,
Dividend,
Finance,
Financial Accounting,
Financial Planning,
Investment,
Pricing Strategy,
Yale University
Source:
Yale University

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Overview: This paper develops a traceable, dynamic, arbitrage-free model capable of jointly pricing a cross section of bonds and stocks. The bond-pricing portion of the model produces the standard affine term-structure equations. The paper then shows that a particular choice of dividend process, characterized by affine dividend yields, leads to stock prices that are exponential affine in the model's state variables.

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Format: PDF | Size: 566KB | Date: Apr 2002 | Pages: 47

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