Ergodicity, State Prices, and Long Bond Returns

Authors

Anthony Tessitore, Daiwa Securities Trust CompanyFollow
Nilufer Usmen, Montclair State UniversityFollow

Document Type

Article

Publication Date

1-1-1998

Journal / Book Title

Mathematical Finance

Abstract

We present an analysis of price systems in securities markets with infinitely many time periods and infinitely many uncertain states of the world. A key result is that a Markov price system (MPS) has a unique representation in terms of the returns on a known set of bonds. The result implies that securities prices are the discounted value of dividends, where discount factors are the reciprocal of the returns on a long-horizon discount bond.

DOI

10.1111/1467-9965.00046

MSU Digital Commons Citation

Tessitore, Anthony and Usmen, Nilufer, "Ergodicity, State Prices, and Long Bond Returns" (1998). Department of Accounting and Finance Faculty Scholarship and Creative Works. 56.
https://digitalcommons.montclair.edu/acctg-finance-facpubs/56

Published Citation

Tessitore, A., & Usmen, N. (1998). Ergodicity, state prices, and long bond returns. Mathematical Finance, 8(1), 85-91.