Capital Market Equilibria

Prologue.- 1. Equilibrium versus Market Imperfections.- 2. Questions and Answers.- The Hybrid Model and Related Approaches to Capital Market Equilibria.- 1. Introduction.- 2. Portfolio Models Based on Different Sets of Parameters.- 2.1 One-Parameter Models.- 2.2 Two-Parameter Models: Mean-Semivariance Approach.- 2.3 Other Two-Parameter Approaches.- 2.4 Extensions to Three or More Parameters.- 3. Rationale of the Hybrid Model.- 3.1 Consistency of the Mean-Variance Approach with Expected Utility and Stochastic Dominance.- 3.2 Explicit Solutions of the Portfolio Problem.- 3.3 Explicit Solutions of the Equilibrium Conditions.- 3.4 Which Mean-Variance Approaches Provide Explicit Solutions?.- 4. Applications of the Hybrid Model.- 4.1 Consideration of Income Taxation.- 4.2 Heterogeneous Expectations.- 4.3 Restrictions on Short Sales.- 4.4 Some Other Market Imperfections.- 5. Appendix.- 5.1 Proof of Theorem 4.- 5.2 Solution of Partial Differential Equation (31).- References.- Portfolio Decisions and Capital Market Equilibria Under Incomplete Information.- 1. Introduction.- 2. Risk Situation with Regard to the Prior Parameters: A Two-Level Bayes Approach.- 3. Risk Situation with Regard to the Prior Parameters: Lin's Approach.- 4. Partial Uncertainty with Regard to the Prior Parameters.- 5. Asset Pricing under Uncertainty.- References.- Option Valuation: Theory and Empirical Evidence.- 1. Introduction.- 2. Option Valuation Theory.- 2.1 Preference and Distribution-Free Results.- 2.1.1 Call Options.- 2.1.2 Put Options.- 2.1.3 Relations Between Puts and Calls.- 2.1.4 Additional Arbitrage Restrictions.- 2.2 Distributional Assumptions and Hedging Models.- 2.2.1 Hedge Portfolios.- 2.2.2 The Classical Black-Scholes Model.- 2.2.3 A Brief Description of Other Option Valuation Models.- 2.2.4 Analytic Models For American Calls and Puts.- 2.3 Preference Assumptions and Non-Hedging Models.- 2.4 New Option Instruments.- 2.5 Applications of Option Theory.- 3. Empirical Tests of Option Valuation.- 3.1 Test of Boundary Conditions Among an Individual Equity Option and the Underlying Stock.- 3.2 Test of Boundary Conditions Among Different Equity Options and the Underlying Stock.- 3.3 Tests of Equity Option Pricing Models.- 3.3.1 Results of Robustness Tests.- 3.3.2 Results of Predictability Tests.- 3.3.3 Results of Unbiasedness Tests.- 3.3.4 Results of Hedge Return Behavior Tests.- 3.4 Tests of New Option Instruments.- 3.5 Estimation Problems.- 4. Appendix: Formulae for the Evaluation of European Calls.- References.- The Value of Security Agreements.- 1. A Survey of Credit Support Decision Models.- 1.1 Credit Decisions in a Restricted Capital Market.- 1.2 Market Uncertainty.- 1.3 Credit Support Decisions with Event Uncertainty.- 2. Neoclassical Theory and Secured Debt.- 2.1 The Basic Approach.- 2.2 Secured Debt and Capital Market Equilibrium.- 2.3 Collateral Policy and Non-Market-Value Debt Claims.- 3. The Theory of Credit Support Decisions in the Light of the Economics of Information.- 3.1 Collaterals as a Tool to Limit the Creditability Risk.- 3.2 Contemporaneous Examination of Credit Standing Risk and Credit Reliability Risk.- 3.2.1 Changing the Dividend Policy.- 3.2.2 Changing the Credit Policy.- 3.2.3 Changing the Investment Policy.- 4. A Scheme of Credit Contract Covenants.- 4.1 Credit Contract Covenants.- 4.2 Covenants Referring Indirectly to Means of Payment.- 4.2.1 Special Obligations of the Debtors.- 4.2.2 Special Rights of the Creditors.- 4.3 Claims of Creditors which Refer to Means of Payment.- 5. The Efficiency of Securing Debt.- 6. Appendix: Secured Debt and Uncertainty.- 6.1 The Firm's Position.- 6.2 Derivation of the Value of Secured Debt.- 6.3 Market Value of the Debt in Dependence of its Collateral Policy.- 6.4 The Maximization of the Market Value with Total Collateral Policy.- References.- Asset Pricing in a Small Economy: A Test of the Omitted Assets Model.- 1. Introduction.- 2. Portfolio Based Tests of Efficiency.- 3. Omitted Assets.- 3.1 The Model.- 3.2 Integrated and Segmented Capital Markets.- 4. The Data.- 5. Efficiency of the Canadian Market Index.- 5.1 Beta Estimation under Thin Trading.- 5.2 Preliminary Estimates.- 5.3 Maximum Likelihood Estimation.- 6. Tests of the Omitted Assets Hypothesis.- Appendix: Iterative Maximum Likelihood Procedure.- References.- The Simple Analytics of Arbitrage.- 1. General Equilibrium, Modern Finance, and Arbitrage Theory.- 1.1 General Equilibrium.- 1.2 Modern Finance.- 1.3 Arbitrage.- 2. An Example, its Generalization, and the Question.- 2.1 A Portfolio of Savings Bonds and Term Deposits.- 2.2 Is a Free Lunch Possible?.- 2.3 Events and Futures.- 2.4 The Question: Should the Original Portfolio be Revised?.- 3. Arbitrage versus Equilibrium.- 3.1 Some Borrowing from Production Theory.- 3.2 Either Arbitrage is Possible or Equilibrium Prices Exist.- 3.3 The Lemma of Minkowski-Farkas as Mathematical Background.- 3.4 The Derivation of an Issue Price.- 3.5 Summing up the Results.- 4. Derivative Contracts in Complete Capital Markets.- 4.1 Complete Capital Market.- 4.2 One-Period Option Pricing.- References.- About Contributors.- Author Index.