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Published in:
1999 | OriginalPaper | Chapter
The Market Pricing Kernel Approach
Author : Dr. Bernd Meyer
Published in: Intertemporal Asset Pricing
Publisher: Physica-Verlag HD
Included in: Professional Book Archive
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In a frictionless market1 it follows from the Law of One Price2 that a market pricing kernel3$$\tilde \varphi _{t + 1} $$ exists for each date t such that the ex-dividend price $$P_t^i $$ of any asset i can be calculated from the equation (2.1)$$ P_t^i = E_t \left\{ {\tilde \varphi _{t + 1} \cdot \left( {\tilde P_{t + 1}^i + \tilde D_{t + 1}^i } \right)} \right\}. $$