Corporate finance 1. Theoretical Approaches 1.1. Corporate Finance in Arrow-Debreu world Complete market, perfect market, perfect competition, symmetric information, private consumption Risk: risk sharing, risk pooling, technology shocks, individual vs aggregate shocks Lucas(1978): existence of equilibrium asset price Merton: continuous-time pricing model ption pricing Capital structure: debt/equity ratio Mehra-Prescott (1985) zle · Incomplete market Page 1 of 5Page 1 of 5 Corporate Finance 1. Theoretical Approaches 1.1. Corporate Finance in Arrow-Debreu World • Complete market, perfect market, perfect competition, symmetric information, private consumption • Risk: risk sharing, risk pooling, technology shocks, individual vs aggregate shocks • Lucas (1978): existence of equilibrium asset price • Merton: continuous-time pricing model • Option pricing • Capital structure: debt/equity ratio • Mehra-Prescott (1985): equity premium puzzle • Incomplete market