St Andrews Research Repository

St Andrews University Home
View Item 
  •   St Andrews Research Repository
  • University of St Andrews Research
  • University of St Andrews Research
  • University of St Andrews Research
  • View Item
  •   St Andrews Research Repository
  • University of St Andrews Research
  • University of St Andrews Research
  • University of St Andrews Research
  • View Item
  •   St Andrews Research Repository
  • University of St Andrews Research
  • University of St Andrews Research
  • University of St Andrews Research
  • View Item
  • Login
JavaScript is disabled for your browser. Some features of this site may not work without it.

Solving asset pricing models with stochastic volatility

Thumbnail
View/Open
2015_deGroot_JEDC_OpenAccess.pdf (521.3Kb)
Date
03/2015
Author
de Groot, Oliver
Keywords
Endowment model
Price-dividend ratio
Closed-form solution
Numerical methods
HB Economic Theory
BDC
Metadata
Show full item record
Abstract
This paper provides a closed-form solution for the price-dividend ratio in a standard asset pricing model with stochastic volatility. The growth rate of the endowment is a first-order Gaussian autoregression, while the stochastic volatility innovations can be drawn from any distribution for which the moment-generating function exists. The solution is useful in allowing comparisons among numerical methods used to approximate the nontrivial closed form. The closed-form solution reveals that, when using perturbation methods around the deterministic steady state, the approximate solution needs to be sixth-order accurate in order for the parameter capturing the conditional standard deviation of the stochastic volatility process to be present.
Citation
de Groot , O 2015 , ' Solving asset pricing models with stochastic volatility ' , Journal of Economic Dynamics and Control , vol. 52 , pp. 308-321 . https://doi.org/10.1016/j.jedc.2015.01.001
Publication
Journal of Economic Dynamics and Control
Status
Peer reviewed
DOI
https://doi.org/10.1016/j.jedc.2015.01.001
ISSN
0165-1889
Type
Journal article
Rights
Copyright © 2015, Elsevier B.V. This work is made available online in accordance with the publisher’s policies. This is the author created, accepted version manuscript following peer review and may differ slightly from the final published version. The final published version of this work is available at https://doi.org/10.1016/j.jedc.2015.01.001
Collections
  • University of St Andrews Research
URI
http://hdl.handle.net/10023/10725

Items in the St Andrews Research Repository are protected by copyright, with all rights reserved, unless otherwise indicated.

Advanced Search

Browse

All of RepositoryCommunities & CollectionsBy Issue DateNamesTitlesSubjectsClassificationTypeFunderThis CollectionBy Issue DateNamesTitlesSubjectsClassificationTypeFunder

My Account

Login

Open Access

To find out how you can benefit from open access to research, see our library web pages and Open Access blog. For open access help contact: openaccess@st-andrews.ac.uk.

Accessibility

Read our Accessibility statement.

How to submit research papers

The full text of research papers can be submitted to the repository via Pure, the University's research information system. For help see our guide: How to deposit in Pure.

Electronic thesis deposit

Help with deposit.

Repository help

For repository help contact: Digital-Repository@st-andrews.ac.uk.

Give Feedback

Cookie policy

This site may use cookies. Please see Terms and Conditions.

Usage statistics

COUNTER-compliant statistics on downloads from the repository are available from the IRUS-UK Service. Contact us for information.

© University of St Andrews Library

University of St Andrews is a charity registered in Scotland, No SC013532.

  • Facebook
  • Twitter