Van Der Hoek, J.Elliott, R.2012-10-282012-10-282012Stochastic Analysis and Applications, 2012; 30(5):865-8940736-29941532-9356http://hdl.handle.net/2440/73750This article fuses two pieces of theory to make a tractable model for asset pricing. The first is the theory of asset pricing using a stochastic discounting function (SDF). This will be reviewed. The second is to model uncertainty in an economy using a Markov chain. Using the semi-martingale dynamics for the chain these models can be calibrated and asset valuations derived. Interest rate models, stock price models, futures pricing, exchange rates can all be introduced endogenously in this framework.enCopyright © Taylor & Francis Group, LLCContinuous time Markov chainsderivative asset pricingstochastic discounting functionsJournal article002012150710.1080/07362994.2012.7048520003075938000082-s2.0-8486501809523416