New method revolutionizes asset pricing, shaping future financial markets.
The article explains how to calculate the price of an asset using the net present value approach. It focuses on zero-coupon bonds, which have a single fixed payment at maturity. These bonds are valued based on the expected discounted payoffs they generate. By using zero-coupon bonds as a starting point, the article provides a way to determine bond prices and yields for default-risk-free assets. This method helps investors understand how to value assets in the financial market.