Econometrica: Mar 1985, Volume 53, Issue 2
An Intertemporal General Equilibrium Model of Asset Prices
John C. Cox, Jonathan E. Ingersoll, Jr., Stephen A. RossThis paper develops a continuous time general equilibrium model of a simple but complete economy and uses it to examine the behavior of asset prices. In this model, asset prices and their stochastic properties are determined endogenously. One principal result is a partial differential equation which asset prices must satisfy. The solution of this equation gives the equilibrium price of any asset in terms of the underlying real variables in the economy.
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