0% found this document useful (0 votes)
48 views11 pages

Asset Pricing

1) The document discusses maximizing a utility function u(c) where consumption is c. It explores the properties of u(c) and finds its maximum subject to a budget constraint. 2) It derives an expression for u(c) as a function of c and shows that consumption will be at the point where the marginal utility of consumption is equal to the price. 3) It finds the optimal level of consumption by setting up a Lagrangian and taking the first order conditions, yielding an expression for optimal consumption equal to income divided by the price.
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
0% found this document useful (0 votes)
48 views11 pages

Asset Pricing

1) The document discusses maximizing a utility function u(c) where consumption is c. It explores the properties of u(c) and finds its maximum subject to a budget constraint. 2) It derives an expression for u(c) as a function of c and shows that consumption will be at the point where the marginal utility of consumption is equal to the price. 3) It finds the optimal level of consumption by setting up a Lagrangian and taking the first order conditions, yielding an expression for optimal consumption equal to income divided by the price.
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 11

hor+tu cEo *sszr

_+T
Putct *q e
-Tff"a-

Yeak<

+ &Lc-P-r;.sitrr^:
# F*uA

[n a. rt/^*s

Z ?ao* s

as! , [n .H,-n- '?*r) Nt

4s:"* *"k (larr*a-flva I l*vesh** s-t\cal{ r nac\ r:'i>< utt


g:se:
--> 9 ea*<"t^)^ A ier.ls ""* @ Va"^*;+,e *lx.tqlrzvar'i.- sacttces s* -rt

L<fA4<E A s'T^+lDJ)
@ Wu *t.- r.isk $ck {eaarda-d,.
ll-
A+593t
E(?.',.\ - f,+y
$.tk-t {t

I E xrrs - S I "- Rt^r^^a {or ria<


Sys{cya^h'<; r,* (3

6{
./.?"/kt . I t.-rry'1.
6 Akb/ q"-a &.-l d ag-g xz ?
LPt? H

LAPH ca/-?1 dk-tireta, fuq*" etr.,+a;"- nar*z^a*ft\/q ^X.1:y-Q fua


df = Ef'q ) \+ P; LaAr^)-Yf 1l
rL . A<-k;eJ ralla.tt ,i tvT.e*

E(f 4s 1/s, d
{?/ ,l^a-,
S'rsTE t4*T la Rt<x I eJl,-a,*a,a . 8 La- uunAt-y

-) Np {f4 4T I te 9T*rA H fiNT s


tr.Je. QGr4/a Ah
e€I'+,parec4
Led
+t*,t ae-f"^^l rrelt<-rr b *la'n-e tJe r^raal d b1 1,4 rg U eD

&;r" Arev;i',q',- 7az dzyire- G ,{n - l2a^-t- a 'ttwr06*-l,t' dryr-s-


flrx 9{reata a.ero{s g
U(c) = zrE
,x dera.. I

$ to, ooo

8*
(a)

ryE * V(a a**)* u(e,J'?.rt(c.u)


2fio,{ + 2{G;"t = (p+too:1rt:
lez..il c ul*'6 fic+' it,t ++')- a{rn lc i*- r*

(*grprA$'rY E&t v * L-r^JT- s ttl


= E f.,'
b\+-Ai- 6ft 1^ ,le?
t-t(c-x
=) g.{Z = fi,c => {'e_" . 9 5; + C* = $s)L= { grozf
I
I

EC") --E*pac$4-d telrai of a-trla$a gne*v +te' 1qrrJole '


s O- , &-u};--a) + b ?wzl* Lc--a)
f (**5056)=
+ *too.r + $tooo .u- € g?r5o
+
7z,c-Qlgy ?P7ulur4= ea") *ax, $iroso $3,o?-5= 4 Lto25

4 is*Er-At-t >*Ttonv
O Por,ae,- &-,fi aC") ? f' o1d< t

@ f" altszr 6a.-ro /,t'hies t" c-> O

- i'e na+ 3uat- 5o"- t;i !

# 'Ta a- u*llg b t/ gl-.t-td be- bd?dcc cez^&e"s


Q gs if s+-t i*+W t^cy?3^r^,^fr ?

@9+tF'l Zoz:ceiYe- ?

9f rlo &to^, aae ea,* hv.Csz-a a;-i+-*-+<^t U


(t'(c) - uLe) = * '/c*
q.s o 1{<l t c-} o *1+t-o,* tr'cc) > cr ------* C}

ulrt c) 2- tc- <o 4.€ Y \o

Gx !- r(=6
c_
il(c) = #
t-t'
A

€:s x Npolren utTY

ls tv^zj- ,+a.e.-t Cc!) F ECU)


U
-t
vLc , ?ws . t*Ln) grv b (c*a) + u(u) yroa Ct=o)
Wb Lt=^1 -t L2 Wta (u*u
Q,o< Pr.vt"itlta =
.D Lc)-Lr= q|-Cx-o (_L*t A ts WcYe4
(-l-t ao c>o

lnse, C^,*Y ltf<-*tni+ r lF tre r'srU lia'tJ'e- 11*ts d4+ r"-arfi vs

*{
tl.rcc) = c-

.no lirn tl'c.) : 94.,r* e-t = ;' - /.


ar l/

v(C)= ELUJ
tn a* = L{-t^} ha L (c:a') t trL\') Fl-i L C": E
* tr^e. f, + tr" b .l Or,?rr".d | ,L
=L L^ 4-b = t. Lqr, Y>-
=Y c* =(sb)Y-
fitaa EC") =
p*;,k *er*;ur, = eCc)-C*

&.x e a<d<l
ft fi^d c* u Ccj ) = ELv-1
L !t-5
(ox; t-x o<v<l
=
t-Y
As{ = u(o) Przv Lr-*") * u(D wuc=,
2- 1&) +*cDJ & [_o'-a "'"''J
9r
.L c*
Lt* Or-r/* g-v l (
J.s htl- <.n\ Ct ,tt tg L'

la1n b= { torooo k r* Y
k'+ {oooo ?a L= ggb'=4aozf:
loo

-l ea,#. L: €*<t- ffre*i,-r- '= o


{=a
(;1c
" '. {el u! . ,6u = Jproc e *r|*'" = (' tooo
; Ecc-} - * s,src $ {O 5-o
"', R,?to PYer*au^r *
; F t5ro5:<>- ]o2-E*; br*'r
4 t / *L* ts7'/rf* bLe s*e' ;a"i<"< ant<**<
613 \a-1'l
v
@

o<P<

-f * o =) P-r tra N er'far+LtT y (-#de


'*o 6rnct Cr uC-ci )= *-T-u1

Ll+s = LL(c'): c^
eg,a5 = efq = ,"t-tl-) Pvoa (c-o) +vAL) &ou Lc--u.

= a- fr-P)+ bP
E(c') = c- Anru (c=a) + bfl-r.(c*t) -- a fi-P)* bP
+ p(.,) = Ee) -- Lk
D
ft ,sn PeEwt u,.-l -- ECc) -c' = O <.T Iuu

z {: t *> l..A u*t&,A - ,

-Gv t/cc")= E(t')


+lnLn=dttG p,-r- (a=.) r Lt-Lt) S-U (':9
(r-e) * t+.
C^) + e I hCu) - t^ t^)] = tr' (']* P ./,

+ Ln'= ^k\l
Wl.a^ P**a.(r,li = E Cc*) - c" -

o<{<l
= V(vJ
c*
('v)

z tr(^) WV {c=a) + o(Cb) r- la-= u

2 tr (.) C,-'F ) * u(t")'F


r l-Y
a r-f,
,-e) + ",=:. "1= =
= +-- T ar-f,+
r-T
1-f,
a t-U
t+^b -I K' -l_l
t*3- ( = bl* \jr=-. €t+s = t*d tF

=l L* r+F K.t-f -r 7
l-t. r K-t

Qi"u* t-n , c.tc cle/'tra- '?eeutvtut = e(c) * Ln


Qt<iat/-

Lf e/13" E = a. h* u 1.-o) + Br^t- {Luu (.:b

= a,Cr-P)+bP
F a-+ F(1""$
.t-o S-<c) -- a.- ' E (u)= uCo)
P* L2
€ C*) : \- L"(c) + t'{ b)J
P= 1
te.Le) * b

uro
uP

?+y
Uta

e. C Bcc) b

Fro
l\i,* vtc*) =- E(u
+ r.r fe" ) = tt(") (r - o) + *Lu) ' o
* r-t(a_) (F: <f." 1

r-o) * t, to

il rr-(c:)- E-d) *'> uCL*) = * k)*o + u-tb) tD i= Ldce

:) Lfr *6 tlcz"l ,E(c) * + b (t) -' !>


^ ft-t)
I

o E.( L-} *c
e la * b =' o
R{ *k- 9raoi.r,,. -
h. Po Di.v,t
P^ rt-

Dt>6 ? D2- -.+ t70 t=l


t00 ,-oo
€'-P9/eu =rod" L (z=
+ UJe- Oet*r,* a.dd .fun d. te+1]"\-l- Q1a @.r ADDtl6.t g1>o zD7

Q"ttr) fu+ ai
gr)
.ne4utr.v .fu
= tr- Lrt
\r = :ti. (r +R.u)

re*trrrr - la+l>> o"{e^, .t'^/16 Yg-ATs '


= t^ (t+r) = tr^ 2- ,6.6931 d 61,'3lf.
g^ r. \n(r+Ar) z tn(r+ ro.i1,) -

1r2 > t,,. LlrA>): l^(r-Sdt.)z.h Ll-L) = tnLr,


-t.6:Sl o< - L1,21/.
{14YL?6

, f\= u(r+21)= t^ * -,) = r, (t'/e")


Tz-- t^ C P-lf ,)

=lfr+fzr--"+fr
. -'. Le+ f Co;f) = Kr*t+i-Peznod roE reJ.-rrr- ove.n .LoiI] = nr+rz+- -'+1f1 = L'rt
re
Nor,n, ff : &;L fr<- L{-er<<f t.,\F
Bt = Broa v^.t^t at t=I -- Bodf
B:= Band vnlrc-^t t'-L = s'#= (uod*)oa =Bofl
- *^.-, ; t""u- r*"r" +xns .|+. T) fi'a yee.Tg Dotzl I

- =t^(g;lg0= htP:""a)=zr*
o., F+r t=:T , tot*l reltrrn, ( ,.e. .r ,.2(o.vn) = T" q

m ?eoe+lLtry , ?Yob 4 it- c r,x1\

:> Nou> alol arld bL +1"-o- di<,.t; ua}, a *f I.n


T
1.rr) = E r.y+r7* --+fr) = E(r') t E(rz) + -- fE(r")
* kT as e (ri1- Sa

Va $.rr) = V^-G,)+ Va--lrr) t-- -rV6,,-(rr)-r ZL ar";^,,^rg*erraS

=usr o alc * r;&fioau-d


f
Noes , 619 nafnaf ++"-* lfa tl ot?- h-o.dr^al '
a
ll*"o, lrr N N IIT g,T

+ Nozr .fru, tLw+ya,U pryub = h*, art (T.rq |. :f"o I x<o O1.t"- X= lf,r-Trf
€)<cr-gs re,Pu-rp i,a slo& [,ta rre*rrrx ore*Q a.,I,rr're. .+'l,..c Trq4( be*o)"lrLa.k

7 - 4,7 =(p-Tr)'r
v(x) : vC5-rt-T,<r4): v 1rr)+V(frvr)a -ZLat (Zr.,f.yf)
Tx T,1 is <errrSla,a{ =) V S,r+)= Cov !.rp,Trf
=) VCx = str
lk \24- / Kfi-, N lr-r+)Trs*T
S-a 6 xcoto =Pr-,a x -G-q)r $'r+

NaLrr zA, N(u,') fl:ai = s


- N f -sRJ? 9Q)o a< xai"o{ rde
\trves+-ih :f\Ct4tat*€-e it yaq
tt-T: O , ej"crrl+al( !n|ob: *@) = V,
AS f---7"3 z SFP asynptotes \-o O

* t Nq6 allttt h-e .ct-tw.,\ rela;g* h b4- S7'O Cfip;3T1L t2lq7n = Y


.|
16= A,-u 6 lf, frtr w ru (Hi.Cl
\larr o, N
l,** s*g ) e-x.o.a-s/' ?€"ft^rrh * TerL = Xa,! _ .tbl_
% ra

E (r",") - E,(rf,-,^',€) - = - Hq^e 0 s,c kr axe loia"4t", Lia

V Cr",e 2 Vor. ( "f'n t) > \la.^'' * Yo* 2 cr^t

ftC-, ',' = ft'


'r
0,n .* @iU be fu /*r'rto b*o frfo
ts llsrb , f,qr, * (v Lid asrr^ l =) Lnarr r.v N (U", , A) )
Str+ 2 |ytb \ 7ts,r { at,ol^,*
-?rotn
LT4p - [tq t
o -p.r 98rG
Q,N fe,l7
=N -qseVT
Ncrz.r , A'lC, ra-l-'o

H"lo" z E Crs,* - f,at^,v)


Qsa = =) (SP = sq
sed (2t,. - tan*)
Exslopll-:- p" = to'/" Wfq = 5/, = Hqm
{s = 2o'1. {ur*.td/" .r f .0.5
lAu= Ft- ltot^ = ,7. arr o.og
CL = CL + cur,^- 2e Cs 651p, = .zn-t ,1u-'2(o,;) (:")('l) = o'oE - 6'oz z o'oJ
6a = 6.11\L a" t'l.3L'1,
6sa Uzt- O'09 o,z8s ge>
Ioe = 7

-
'A-t/4-Q- 6sa ) sA-
i+ (,rEa) 9e- + - qse < - sQ :) -6<'tzfr ( -se..I-r
+ NCas€\rr) ( N(-5nv-r)
lleae-a , Shrrfl-fet! qpucJo!.u\ ,;$u ac lazoaru rL c"Sc S sh<Dc-harh^<, ba-ntl^r+-4^-Q.

t*s ^Lxonc <L., l'"/an ,t sR = Y';tr


iF T -- ]f,ur- 4 6sP.>sR rtt (A<G
fr= fi-+cir- - L?G,a"y) ( 6!
) - 2? fsdur- +C\.r- <o :> Alt- <'2? GCbl^

GsP> s8' % tt"- +{"- <i.arq*fl qvoGa.{,$.Jt vm*n re,ap-


-aa+ tr 'Uaxf-na^l.r ulU gr \c'r^re-

= t14 (o.s
6.1o
ib v.J'^s-s ;^ P,PrS
o,2a

f qtt tlov ,>alg


6@@ F.,r.rprr.tq RmtO Su-pftr*lu
|AL *:iEllb\^e, **g.-{- ". lnveg+fi'y,Lt Pr+&"Uo
-"-- U-bi!.E I (a^mrt<4 t*,.re^,< a* Lr,^.-f-rr.a^lr- -^tf ( goxU S,*d.,'l
- ?G,r : t"6 ne+cr,' fy6r,, fL4.,r,^,G'f0'ffa.fdo- -C&56rl) I"'F{ral --
* bood (r-i^r"ip.,h)
6A
Yirt tl*n.. $d {!. o"*tron;
" k
u,-^o-l-,'*J^t -.__rc-
t va.t*e q 3r - As.*-t

ev" ) { v"r.u- oF Br - ud.;Lb


Na?"r , V1 C.o/,-laz- > I

T *Fir-*<**-t- Aon t=o


+eraal,Lo Ys=l i.a Bo * so

FRS VrSo o(Q(i 9', Deg; rre {u.ar& r^tio


?ania = B^.i,
T
sr> so I. le.
T
br -- Bo e-p 4 Lr f,e (n,T) = 1"g,1 't )fs, z+ -- * f,s,T

s,l g, o \"6 Sri/so


'Tl'e,x 1
=
> €o €r.f L:-rs',et 'rf.
bo e*+ \1to,.1 1t e,+ &,r o (ri,. -tso*
T Vo =\ asrunp*rar-
= exp Lter*
'Qtt 5 laq O
= 0rnrlo 1rr <e =P

toa lqcr,: , te,k nzlld N ( F.rdv.\ tle. lTe,r rv Nx ([t r ,AZr


>> l.na,r - lJe'T N (o,l)
Ae-,t-T

2> FPs ffov = ?


5-f,e>+ - HeT lq6o - rtlal w-t
6i.fr 6'€.ffi 6?./T

= N\ (- {g -'33 I \
" N (-tt')
&r1e-v- , *{f) , QUr- (Ze
9( e?t 4t |ca 4 Fe-s P = N - fl C qsft,tG)
f"- e o(e(t ,bfi Bco 9FRs?. N(-

Yfz./* PPSP ->o ceT*+o L " C i<r) )+ rri (-'"e) --? o

l,Jte^, T +'8 F.fr e\ I

u€
w
4> *,b
+o
?Ag? *>o a.a T+a L ru t+(-r)) *+ c.r (-*) + o ]
g@
R^4 Tx ,tLa^., tres P is rr\^X
* ltox tt(-t(r))
'"c.y.E T-
=> nqn {-(r) H.Y.t T
-f 'cr) =/P"_ t t ;i * lrvru \ r_

7lz
f ?o + *.=-L+, 1
)T*= 0'e t o*Q

1"6€ Y(e
Tx = -

{t,- [ W < X+r" p:^*ax.ti L, ce Vt ) : % l,}:'-,,e q_ € fo , t]

i & uoe lrrrrrz,!{+.aE r Loa vr = re,e n/ N ( [,r.r,0-])

d;n
tse- Lr,,gr,r +r"rt- F.,rau I Z 3 1y Dra)*- u-q Z I =q

N Ct .64E )= o.os cr s)_ o<+< tt


.>
"y.ao"+u- -*ooeJ I-Lo;;m,rT, -/.--_

eT) r,si++. ?ea,F.-{+ f! "f


(r) * o + Fe + ru4-7-i
t
,'.'cu) =O Nfr/a1 z,

ri r'co) fe

+ }Tn =QF)* *. _T AT
t{-'Co)
Ve) I

You might also like