Winner of the prestigious Paul A. Samuelson Award for scholarly writing on lifelong financial security, John Cochrane''s Asset Pricing now appears in a revised edition that unifies and brings the science of asset pricing up to date for advanced students and professionals. Cochrane traces the pricing of all assets back to a single idea-price equals expected discounted payoff-that captures the macro-economic risks underlying each security''s value. By using a single, stochastic discount factor rather than a separate set of tricks for each asset class, Cochrane builds a unified account of modern asset pricing. He presents applications to stocks, bonds, and options. Each model-consumption based, CAPM, multifactor, term structure, and option pricing-is derived as a different specification of the discounted factor.
The discount factor framework also leads to a state-space geometry for mean-variance frontiers and asset pricing models. It puts payoffs in different states of na
