Asset pricing

Asset pricing models
Regime Asset class	Equilibrium pricing	Risk neutral pricing
Equities (and foreign exchange and commodities; interest rates for risk neutral pricing)	Capital asset pricing model Consumption-based CAPM Intertemporal CAPM Single-index model Multiple factor models Fama–French three-factor model Carhart four-factor model Arbitrage pricing theory	Black–Scholes Black Garman–Kohlhagen Heston CEV SABR Korn-Kreer-Lenssen
Bonds, other interest rate instruments	Vasicek Rendleman–Bartter Cox–Ingersoll–Ross	Ho–Lee Hull–White Black–Derman–Toy Black–Karasinski Kalotay–Williams–Fabozzi Longstaff–Schwartz Chen Rendleman–Bartter Heath–Jarrow–Morton Cheyette Brace–Gatarek–Musiela LIBOR market model

In financial economics, asset pricing refers to a formal treatment and development of two interrelated pricing principles,^[1] outlined below, together with the resultant models. There have been many models developed for different situations, but correspondingly, these stem from either general equilibrium asset pricing or rational asset pricing,^[2] the latter corresponding to risk neutral pricing.

Investment theory, which is near synonymous, encompasses the body of knowledge used to support the decision-making process of choosing investments,^[3]^[4] and the asset pricing models are then applied in determining the asset-specific required rate of return on the investment in question, or in pricing derivatives on these, for trading or hedging.

^ John H. Cochrane (2005). Asset Pricing. Princeton University Press. ISBN 0691121370.
^ Junhui Qian. "An Introduction to Asset Pricing Theory" (PDF). jhqian.org. Retrieved 2018-12-16.
^ William N. Goetzmann (2000). An Introduction to Investment Theory (hypertext). Yale School of Management. Archived 2008-08-05 at the Wayback Machine
^ William F. Sharpe (n.d.). Macro-Investment Analysis (hypertext). Stanford University

[1] John H. Cochrane (2005). Asset Pricing. Princeton University Press. ISBN 0691121370.

[2] Junhui Qian. "An Introduction to Asset Pricing Theory" (PDF). jhqian.org. Retrieved 2018-12-16.

[3] William N. Goetzmann (2000). An Introduction to Investment Theory (hypertext). Yale School of Management. Archived 2008-08-05 at the Wayback Machine

[4] William F. Sharpe (n.d.). Macro-Investment Analysis (hypertext). Stanford University

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