Theory of Asset Pricing by George Pennacchi (Solution)

Contents
Chapter 1 Expected Utility and Risk Aversion ...............................................................................1
Chapter 2 Mean-Variance Analysis ................................................................................................6
Chapter 3 CAPM, Arbitrage, and Linear Factor Models ..............................................................12
Chapter 4 Consumption-Savings Decisions and State Pricing......................................................17
Chapter 5 A Multiperiod Discrete-Time Model of Consumption and Portfolio Choice...............24
Chapter 6 Multiperiod Market Equilibrium ..................................................................................33
Chapter 7 Basics of Derivative Pricing .........................................................................................37
Chapter 8 Essentials of Diffusion Processes and Itô’s Lemma.....................................................41
Chapter 9 Dynamic Hedging and PDE Valuation.........................................................................45
Chapter 10 Arbitrage, Martingales, and Pricing Kernels ..............................................................50
Chapter 11 Mixing Diffusion and Jump Processes .......................................................................59
Chapter 12 Continuous-Time Consumption and Portfolio Choice ...............................................62
Chapter 13 Equilibrium Asset Returns..........................................................................................74
Chapter 14 Time-Inseparable Utility.............................................................................................79
Chapter 15 Behavioral Finance and Asset Pricing........................................................................85
Chapter 16 Asset Pricing with Differential Information...............................................................91
Chapter 17 Models of the Term Structure of Interest Rates..........................................................97
Chapter 18 Models of Default Risk.............................................................................................104