A Simple Approach to CAPM, Option Pricing and Asset Valuation

In this paper we propose a simple, intuitive approach to asset valuation in terms of marginal contributions to the characteristics (moments) of the market portfolio. Considering only the first two moments, mean and variance, the valuation equation is shown to correspond to Sharpe’s CAPM. A risk-neutral pricing formula is easily derived, showing the equivalence between CAPM and the Black and Scholes’ model. Extensions to higher moments like skewness and kurtosis are straightforward, providing a generalized valuation equation. Finally, the generalized equation is derived in a different, more rigorous way, as a result of a classical intertemporal general equilibrium model

A Simple Approach to CAPM and Option Pricing

In this paper we propose a simple approach to asset valuation in terms of two characteristics, expected value and expected variability, and their distinct marginal contributions to the value of the market portfolio. The result is shown to correspond to Sharpe’s CAPM. We then show that pricing in terms of characteristics (or CAPM) applies to any asset and in particular to option valuation. A pricing formula corresponding to Black and Scholes’ no-arbitrage option pricing is obtained under the assumption of normal asset price distributions

Real Interest Rate and Growth: An Empirical Note

Are restrictive monetary policies harmful to growth? The note aims at providing some empirical evidence to answer the question. A significant negative correlation between growth and real interest emerges over the period 1960-94; in the eighties this relationship strengthens. This result is in agreement with the traditional view of a long run positive link between growth and capital accumulation and a negative long run link between accumulation and the cost of capital. Moreover the outcome is in line with the view that links the slowdown in economic growth of the industrial countries over the last decades appears to the implementation of restrictive monetary policie

On the Time Stability of the Output-Capital Ratio.

This paper is concerned with the role of the output-capital ratio in growth models. In the first part we highlight the behaviour of the output-capital ratio along the balanced growth path in the models of Solow (1956) and Romer (1986). In the second part we assess the stability of the ratio for some industrial countries

An Economy of Industries and its Aggregate Representation

The purpose of the present paper, in contrast, is to show that Keynes, in The general Theory, thought in more complex terme, referring to an economy made of industries in the Marshallian tradition

L'economia politica e l'evoluzione del capitalismo negli ultimi quarant'anni

Convegno in onore di Giorgio Lunghini

The Modern Theory of Finance: Suggestions for an Overall Vision

Traditionally the term "finance" has been used to indicate the art of raising funds to realize both public and private spending programs

Recenti sviluppi nella teoria monetaria

Vista da molto lontano la traiettoria della luna intorno al sole potrebbe essere descritta in modo simile a quella della terra: se non si va per il sottile, terra e luna procedono vicine nella loro rivoluzione intorno al sole