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| Author: | Hindy, A. |
| Title: | On volatility of prices in arbitrage-free markets |
| Journal: | Economic Theory
1995 : VOL. 6:3, p. 421-438 |
| Index terms: | PRICES ARBITRAGE MARKETS |
| Language: | eng |
| Abstract: | This paper addresses the question of what one can learn about the dynamics of an economy from observing cross-sectional and time-series variations in the volatility of prices in an arbitrage-free securities market. The author introduces the notions of stochastic derivatives, marginal risk-adjusted growth rates, and marginal risk exposure in a single factor economy. The author shows that future variations in the state of the economy are due to two independent sources. |
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