Regularity Conditions to Ensure the Existence of Linearity-Generating Processes
نویسندگان
چکیده
Linearity-generating” processes offer a tractable procedure to model cash-flows and pricing kernels in a way that yields exact closed form expressions for bond and stock prices. Prices are simply affine (not exponential-affine) in the factors. The linearity-generating class operates in discrete and continuous time with an arbitrary number of factors. This paper presents novel and general regularity conditions which ensure that processes are well-defined. It illustrates them with a series of economic examples. (JEL: C65, E43, G12, G13)
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تاریخ انتشار 2008