MIT Libraries homeMIT Libraries logoDSpace@MIT

MIT
View Item 
  • DSpace@MIT Home
  • MIT Open Access Articles
  • MIT Open Access Articles
  • View Item
  • DSpace@MIT Home
  • MIT Open Access Articles
  • MIT Open Access Articles
  • View Item
JavaScript is disabled for your browser. Some features of this site may not work without it.

Generalized Transform Analysis of Affine Processes and Applications in Finance

Author(s)
Chen, Hui; Joslin, Scott Stephen Walter
Thumbnail
DownloadChen_Generalized transform.pdf (515.2Kb)
OPEN_ACCESS_POLICY

Open Access Policy

Creative Commons Attribution-Noncommercial-Share Alike

Terms of use
Creative Commons Attribution-Noncommercial-Share Alike 3.0 http://creativecommons.org/licenses/by-nc-sa/3.0/
Metadata
Show full item record
Abstract
Nonlinearity is an important consideration in many problems of finance and economics, such as pricing securities and solving equilibrium models. This article provides analytical treatment of a general class of nonlinear transforms for processes with tractable conditional characteristic functions. We extend existing results on characteristic function-based transforms to a substantially wider class of nonlinear functions while maintaining low dimensionality by avoiding the need to compute the density function. We illustrate the applications of the generalized transform in pricing defaultable bonds with stochastic recovery. We also use the method to analytically solve a class of general equilibrium models with multiple goods and apply this model to study the effects of time-varying labor income risk on the equity premium.
Date issued
2012-07
URI
http://hdl.handle.net/1721.1/74650
Department
Sloan School of Management
Journal
Review of Financial Studies
Publisher
Oxford University Press
Citation
Chen, H., and S. Joslin. “Generalized Transform Analysis of Affine Processes and Applications in Finance.” Review of Financial Studies 25.7 (2012): 2225–2256.
Version: Author's final manuscript
ISSN
0893-9454
1465-7368

Collections
  • MIT Open Access Articles

Browse

All of DSpaceCommunities & CollectionsBy Issue DateAuthorsTitlesSubjectsThis CollectionBy Issue DateAuthorsTitlesSubjects

My Account

Login

Statistics

OA StatisticsStatistics by CountryStatistics by Department
MIT Libraries homeMIT Libraries logo

Find us on

Twitter Facebook Instagram YouTube RSS

MIT Libraries navigation

SearchHours & locationsBorrow & requestResearch supportAbout us
PrivacyPermissionsAccessibility
MIT
Massachusetts Institute of Technology
Content created by the MIT Libraries, CC BY-NC unless otherwise noted. Notify us about copyright concerns.