'Museum National d''Histoire Naturelle, Paris, France'
Abstract
In financial economics risk-return tradeoffs show how expected rates of return and consequently asset prices are altered in response to changes in the
exposure to the underlying shocks that impinge in the economy. In these
lectures we will:
(i) Present some of the recent literature that is concerned with the effect
of long run risk on returns and prices.
(ii) Develop an analytical structure that reveals the long-run risk-return
relationship in nonlinear continuous time Markov environments. This
is done by studying a principal eigenvalue problem for a conveniently
chosen family of valuation operators.ou