Essays on the Term Structure of Interest Rates and Long Run Variance of Stock Returns
Author | : Ting Wu |
Publisher | : |
Total Pages | : 102 |
Release | : 2010 |
ISBN-10 | : OCLC:681958679 |
ISBN-13 | : |
Rating | : 4/5 (79 Downloads) |
Download or read book Essays on the Term Structure of Interest Rates and Long Run Variance of Stock Returns written by Ting Wu and published by . This book was released on 2010 with total page 102 pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract: In Chapter 1, I propose a term structure model based on risk-sensitive preferences. Following Hansen and Sargent (2008), I model a risk-sensitive consumer who shows aversion to uncertainties, and evaluates his utility using the max-min utility function. He considers three types of uncertainties: (a) uncertainty of future states; (b) uncertainty about current states; and (c) uncertainty about the model generating the data. I use a parameter to represent his aversion to the each uncertainty. The max-min utility function implies multiplicative adjustments to the standard pricing kernel.