Abstract:This paper provides a closed-form solution for the price-dividend ratio in a standard asset pricing model with stochastic volatility. The growth rate of the endowment is a …rst-order Gaussian autoregression, while the stochastic volatility innovations can be drawn from any distribution for which the moment-generating function exists. The solution is useful in allowing comparisons among numerical methods used to approximate the nontrivial closed form. The closed-form solution reveals that, when using perturbati… Show more
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