Recently in Asset Prices Category

DOC081023100735.pdf

Q. What's something worth? 

A. What someone will give you for it, or, in the case of debt, how much will the debtor pay you for holding on to it.

Is what all the valuation rules seemingly tend to boil down to.  And, since a number of markets have dried up, everyone wants to recognize their assets' accrual value.

However, what if it is unclear if the debtor has the ability to pay?? Should you assume that every penny will be returned and recognize asset values without recognizing the credit risk??

Although this is an inherent problem with holding assets at simply their amortized cost, this overstates asset prices on banks balance sheets, and when default rates are realized (when the debtor defaults or repays the debt in full), then the write-off will occur, and slowly, this false equity will seep out of banks.

Investors & Markets: http://press.princeton.edu/titles/8272.html
Sharpe's website: http://www.stanford.edu/~wfsharpe/
Sharpe's APSIM: http://www.stanford.edu/~wfsharpe/apsim/index.html

Here's William F. Sharpe's latest book... I attached the first chapter, which briefly describes each chapter.
job_21-evince-print.pdf

s8272.pdf

I first heard about it in my Personal Finance class, (the professors take turns hosting the class)
and the reknown Yuichiro Kawaguchi (川口有一郎), recommended us to check out the work that Sharpe is doing...

Sharpe uses a simulation to attempt to derive information about asset prices.  The program named, APSIM [Asset Pricing and Portfolio Choice Simulator], simulates a market with participants that have state & preference...

I also saw a review of it in the Journal of Economic Literature (attached as job_21-evince-print.pdf), which is a bit of a short overview, and I personally have it on order.

Cheers, Happy reading!
Scott