A Study Of Asset Price In The Incomplete Financial Markets

One of fundamental problems in modern finance theory is the capital asset pricing. The fundamental assumptions in the standard financial theory are the rational hapothsis and the expectation utility assumption, and both of them are the foundation of several well-known economic theories, say, CAPM, MM and B-S option pricing. In order to pricing the capital asset, one simple approach is to estimate its future value and take their expectation as the valuation of this asset. Since 1970's in last century, the problems on optimal investment and capital asset pricing appeal to more and more research interests from academic society and financial industries. The financial theory on complete market has been fully developed. However, these researches simplify the theory of conditions, which inconsistent with the financial markets, thus being unable to satisfy the request in the application.This paper is devoted to the capital asset pricing in incomplete financial market, focused on the utility indifference pricing, therefore, the purpose of this paper become more significant.Firstly, in the first and two section, this paper conduct the review research to the capital asset pricing in incomplete financial markets, emphasis on the utility indifference price principle and apply the stochastic dynamic programming approach to transformate the capital asset pricing to the optimal portfolio problems.In the third section,the utility indifference pirce models in the single period securities markets based on indifferent utilities,the quantitative relation between utility indifference pricing and investor's risk aversion and the utility indifference pricing models based on exponential utility when there existent non-tradable assets are studied.Secondly, in the fourth section, the three-branch utility indifference pricing models in the multiperiod securities markets,two-period pricing models when existent non-tradable assets and one of special mix models are studied.At the same time, analyse and compare the result of the special mix models.In particular(complete financial markets),this paper obtain that the utility indifference pricing is same to the no-arbitrage pricing,thus it prove the paper conclusion accuracy in the certain degree.Finally, it is the conclusion section, in which reiterated the main achievements and the conclusions of this paper, and the correlation research and the studies of the direction which has not launched on this paper to make a forecast.