Continuous time one-dimensional asset-pricing models with analytic price-dividend functions
type: Item
instance of: scholarly article
title: Continuous time one-dimensional asset-pricing models with analytic price-dividend functions
zbMATH Open document ID: 1186.91100
author: Yu Chen
author: Thomas F. Cosimano
author: A. Alexandrou Himonas
published in: Economic Theory
publication date: 2010-02-19T00:00:00Z
review text: This paper describes a continuous time one-dimensioal asset pricing model by a second-order linear ordinary differential equation which represents equilibrium or a no-arbitrage condition within the economy. If the discount factor and dividend process are analytic, the resulting differential equation has analytic coefficients. Under these circumstances, the one-dimensional Cauchy-Kovalevsky theorem can be used to prove that the solution to such an asset-pricing model is analytic. Also, this theorem allows for the development of a recursive rule, which speeds up the computation of an approximate solution. This theorem yields a uniform bound on the errror in the numerical solution. The Cauchy-Kovalevsky theorem yields a quick and accurate solution of many known asset-pricing models.
Mathematics Subject Classification ID: 91B25
Mathematics Subject Classification ID: 91G80
zbMATH DE Number: 5673390
zbMATH Keywords: continuous time one-dimensional asset pricing model
zbMATH Keywords: second-order linear ordinary differential equation
zbMATH Keywords: Cauchy-Kovalevsky theorem
reviewed by: Klaus Ehemann
MaRDI profile type: Publication
full work available at URL: s00199-008-0404-2
OpenAlex ID: W1965826464
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DOI: 10.1007/S00199-008-0404-2
description: scientific article; zbMATH DE number 5673390