Notes on the Lucas (1978) and Kyle (1985) models of asset prices

Contents:

• Introduction
• The Lucas Tree Model of Asset Pricing
  • The probability space
  • The Investor’s Problem
  • The stochastic discount factor (SDF)
  • The risk-free rate of return
  • Exercises
• Orderbooks and Asset Pricing
  • The Kyle model of orderbook shape
  • Interpreting the model
  • Estimating the parameters of the model
  • Implications of the model
  • Exercises