Credit and credit aggregates, Financial institutions, Financial markets, Financial services, Financial stability, Financial system regulation and policies, International financial markets, Lender of last resort, , Monetary policy implementation, Payment clearing and settlement systems
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The Stochastic Discount Factor: Extending the Volatility Bound and a New Approach to Portfolio Selection with Higher-Order Moments
The authors extend the well-known Hansen and Jagannathan (HJ) volatility bound. HJ characterize the lower bound on the volatility of any admissible stochastic discount factor (SDF) that prices correctly a set of primitive asset returns.