Description
Intermediate Financial Theory by Danthine EBOOK PDF Instant Download
Table of Contents
Cover image
Title page
Copyright
Preface
Epigraph
Dedication
Part I: Introduction
Chapter 1. On the Role of Financial Markets and Institutions
1.1 Finance: The Time Dimension
1.2 Desynchronization: The Risk Dimension
1.3 The Screening and Monitoring Functions of the Financial System
1.4 The Financial System and Economic Growth
1.5 Financial Markets and Social Welfare
1.6 Financial Intermediation and the Business Cycle
1.7 Financial Crises
1.8 Conclusion
References
Complementary Readings
Appendix: Introduction to General Equilibrium Theory
Chapter 2. The Challenges of Asset Pricing: A Road Map
2.1 The Main Question of Financial Theory
2.2 Discounting Risky Cash Flows: Various Lines of Attack
2.3 Two Main Perspectives: Equilibrium versus Arbitrage
2.4 Decomposing Risk Premia
2.5 Models and Stylized Facts
2.6 Asset Pricing Is Not All of Finance!
2.7 Banks
2.8 Conclusions
References
Part II: The Demand for Financial Assets
Chapter 3. Making Choices in Risky Situations
3.1 Introduction
3.2 Choosing Among Risky Prospects: Preliminaries
3.3 A Prerequisite: Choice Theory Under Certainty
3.4 Choice Theory Under Uncertainty: An Introduction
3.5 The Expected Utility Theorem
3.6 How Restrictive Is Expected Utility Theory? The Allais Paradox
3.7 Behavioral Finance
3.8 Conclusions
References
Chapter 4. Measuring Risk and Risk Aversion
4.1 Introduction
4.2 Measuring Risk Aversion
4.3 Interpreting the Measures of Risk Aversion
4.4 Risk Premium and Certainty Equivalence
4.5 Assessing the Degree of Relative Risk Aversion
4.6 The Concept of Stochastic Dominance
4.7 Mean Preserving Spreads
4.8 An Unsettling Observation About Expected Utility
4.9 Applications: Leverage and Risk
4.10 Conclusions
References
Appendix: Proof of Theorem 4.2
Chapter 5. Risk Aversion and Investment Decisions, Part 1
5.1 Introduction
5.2 Risk Aversion and Portfolio Allocation: Risk-Free Versus Risky Assets
5.3 Portfolio Composition, Risk Aversion, and Wealth
5.4 Special Case of Risk-Neutral Investors
5.5 Risk Aversion and Risky Portfolio Composition
5.6 Risk Aversion and Savings Behavior
5.7 Generalizing the VNM-Expected Utility Representation
5.8 Conclusions
References
Chapter 6. Risk Aversion and Investment Decisions, Part II: Modern Portfolio Theory
6.1 Introduction
6.2 More About Utility Functions and Return Distributions
6.3 Refining the Normality-of-Returns Assumption
6.4 Description of the Opportunity Set in the Mean–Variance Space: The Gains from Diversification and the Efficient Frontier
6.5 The Optimal Portfolio: A Separation Theorem
6.6 Stochastic Dominance and Diversification
6.7 Conclusions
References
Appendix 6.1: Indifference Curves Under Quadratic Utility or Normally Distributed Returns
Appendix 6.2: The Shape of the Efficient Frontier; Two Assets; Alternative Hypotheses
Appendix 6.3: Constructing the Efficient Frontier
Chapter 7. Risk Aversion and Investment Decisions, Part III: Challenges to Implementation
7.1 Introduction
7.2 The Consequences of Parameter Uncertainty
7.3 Trends and Cycles in Stock Market Return Data
7.4 Equally Weighted Portfolios
7.5 Are Stocks Less Risky for Long Investment Horizons?
7.6 Conclusions
References
Appendix 7.1
Part III: Equilibrium Pricing
Chapter 8. The Capital Asset Pricing Model
8.1 Introduction
8.2 The Traditional Approach to the CAPM
8.3 Valuing Risky Cash Flows with the CAPM
8.4 The Mathematics of the Portfolio Frontier: Many Risky Assets and No Risk-Free Asset
8.5 Characterizing Efficient Portfolios (No Risk-Free Assets)
8.6 Background for Deriving the Zero-Beta CAPM: Notion of a Zero-Covariance Portfolio
8.7 The Zero-Beta CAPM
8.8 The Standard CAPM
8.9 An Empirical Assessment of the CAPM
8.10 Conclusions
References
Appendix 8.1: Proof of the CAPM Relationship
Appendix 8.2: The Mathematics of the Portfolio Frontier: An Example
Appendix 8.3: Diagrammatic Representation of the Fama–MacBeth Two-Step Procedure
Chapter 9. Arrow–Debreu Pricing, Part I
9.1 Introduction
9.2 Setting: An Arrow–Debreu Economy
9.3 Competitive Equilibrium and Pareto Optimality Illustrated
9.4 Pareto Optimality and Risk Sharing
9.5 Implementing PO Allocations: On the Possibility of Market Failure
9.6 Risk-Neutral Valuations
9.7 Conclusions
References
Chapter 10. The Consumption Capital Asset Pricing Model
10.1 Introduction
10.2 The Representative Agent Hypothesis and its Notion of Equilibrium
10.3 An Exchange (Endowment) Economy
10.4 Pricing Arrow–Debreu State-Contingent Claims with the CCAPM
10.5 Testing the CCAPM: The Equity Premium Puzzle
10.6 Testing the CCAPM: Hansen–Jagannathan Bounds
10.7 The SDF in Greater Generality
10.8 Some Extensions
10.9 Conclusions
References
Appendix 10.1 Solving the CCAPM with Growth
Appendix 10.2 Some Properties of the Lognormal Distribution
Part IV: Arbitrage Pricing
Chapter 11. Arrow–Debreu Pricing, Part II
11.1 Introduction
11.2 Market Completeness and Complex Securities
11.3 Constructing State-Contingent Claims Prices in a Risk-Free World: Deriving the Term Structure
11.4 The Value Additivity Theorem
11.5 Using Options to Complete the Market: An Abstract Setting
11.6 Synthesizing State-Contingent Claims: A First Approximation
11.7 Recovering Arrow–Debreu Prices from Options Prices: A Generalization
11.8 Arrow–Debreu Pricing in a Multiperiod Setting
11.9 Conclusions
References
Appendix 11.1: Forward Prices and Forward Rates
Chapter 12. The Martingale Measure: Part I
12.1 Introduction
12.2 The Setting and the Intuition
12.3 Notation, Definitions, and Basic Results
12.4 Uniqueness
12.5 Incompleteness
12.6 Equilibrium and No Arbitrage Opportunities
12.7 Application: Maximizing the Expected Utility of Terminal Wealth
12.8 Conclusions
References
Appendix 12.1 Finding the Stock and Bond Economy That Is Directly Analogous to the Arrow–Debreu Economy in Which Only State Claims Are Traded
Appendix 12.2 Proof of the Second Part of Proposition 12.6
Chapter 13. The Martingale Measure: Part II
13.1 Introduction
13.2 Discrete Time Infinite Horizon Economies: A CCAPM Setting
13.3 Risk-Neutral Pricing in the CCAPM
13.4 The Binomial Model of Derivatives Valuation
13.5 Continuous Time: An Introduction to the Black–Scholes Formula
13.6 Dybvig’s Evaluation of Dynamic Trading Strategies
13.7 Conclusions
References
Appendix 13.1: Risk-Neutral Valuation When Discounting at the Term Structure of Multiperiod Discount Bond
Chapter 14. The Arbitrage Pricing Theory
14.1 Introduction
14.2 Factor Models: A First Illustration
14.3 A Second Illustration: Multifactor Models, and the CAPM
14.4 The APT: A Formal Statement
14.5 Macroeconomic Factor Models
14.6 Models with Factor-Mimicking Portfolios
14.7 Advantage of the APT for Stock or Portfolio Selection
14.8 Conclusions
References
Appendix A.14.1: A Graphical Interpretation of the APT
Appendix 14.2: Capital Budgeting
Chapter 15. An Intuitive Overview of Continuous Time Finance
15.1 Introduction
15.2 Random Walks and Brownian Motion
15.3 More General Continuous Time Processes
15.4 A Continuous Time Model of Stock Price Behavior
15.5 Simulation and European Call Pricing
15.6 Solving Stochastic Differential Equations: A First Approach
15.7 A Second Approach: Martingale Methods
15.8 Applications
15.9 Final Comments
References
Chapter 16. Portfolio Management in the Long Run
16.1 Introduction
16.2 The Myopic Solution
16.3 Variations in the Risk-Free Rate
16.4 The Long-Run Behavior of Stock Returns
16.5 Background Risk: The Implications of Labor Income for Portfolio Choice
16.6 An Important Caveat
16.7 Another Background Risk: Real Estate
16.8 Conclusions
References
Chapter 17. Financial Structure and Firm Valuation in Incomplete Markets
17.1 Introduction
17.2 Financial Structure and Firm Valuation
17.3 Arrow–Debreu and Modigliani–Miller
17.4 On the Role of Short Selling
17.5 Financing and Growth
17.6 Conclusions
References
Appendix Details of the Solution of the Contingent Claims Trade Case of Section 17.5
Chapter 18. Financial Equilibrium with Differential Information
18.1 Introduction
18.2 On the Possibility of an Upward-Sloping Demand Curve
18.3 An Illustration of the Concept of REE: Homogeneous Information
18.4 Fully Revealing REE: An Example
18.5 The Efficient Market Hypothesis
References
Appendix Bayesian Updating with the Normal Distribution
Index
List of Frequently Used Symbols and Notation
Roman Alphabet
Greek Alphabet
Numerals and Other Terms
