In this chapter, we discuss ways to use information from financial markets to calibrate models for discounting future risks. This type of information is important for modeling the impact of future uncertainty on present decisions. In some areas of activity, there exist well developed financial markets with hordes of traders using the tools and information available to them to decide the present value of future events. This chapter describes a methodology to use market information.
CITATION STYLE
King, A. J., & Wallace, S. W. (2012). Stochastic Discount Factors. In Springer Series in Operations Research and Financial Engineering (pp. 139–152). Springer Nature. https://doi.org/10.1007/978-0-387-87817-1_7
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