Robust general equilibrium under stochastic volatility model
نویسندگان
چکیده
This paper studies the implications of model uncertainty under stochastic volatility model for equilibrium asset pricing. We derive the equilibrium equity premium and risk-free rate in a pureexchange economy with one representative agent who is averse not only to risk but also to model uncertainty. The results show that robustness increases the equilibrium equity premium while lowers the risk-free rate. 2010 Elsevier Inc. All rights reserved.
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