On the Valuation of Long-Dated Assets

Abstract

I show that the pricing of a broad class of long-dated assets is driven by the possibility of extraordinarily bad news. This result does not depend on any assumptions about the existence of disasters, nor does it apply only to assets that hedge bad outcomes; indeed, it applies even to long-dated claims on the market in a lognormal world if the market’s Sharpe ratio is higher than its volatility, as appears to be the case in practice.

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 51 citations exist upstream.

Papers that cite the same references — the relational fallback while embeddings are still backfilling.