I have 2 questions about bad time and pricing kernel.
Q1: bad time is a qualitative concept(such as the situation of economic recession, strategy failure...), and pricing kernel is SDF, an index of bad time,. But if we quantify bad time and make it into an index (SDF), what is the quantitative meaning of the so called bad time index? Is it a remaining value of one unit asset? Or something else? That's really hard to understand.
Q2: what's the relationship between pricing kernel and multi-factor model? Because i cannot understand the meaning of pricing kernel, i skip to next section of the book. Guess what? the skip does not interrupt me, as if the whole section of multi-factor model has nothing to do with SDF. TOTALLY confused ...
Q1: bad time is a qualitative concept(such as the situation of economic recession, strategy failure...), and pricing kernel is SDF, an index of bad time,. But if we quantify bad time and make it into an index (SDF), what is the quantitative meaning of the so called bad time index? Is it a remaining value of one unit asset? Or something else? That's really hard to understand.
Q2: what's the relationship between pricing kernel and multi-factor model? Because i cannot understand the meaning of pricing kernel, i skip to next section of the book. Guess what? the skip does not interrupt me, as if the whole section of multi-factor model has nothing to do with SDF. TOTALLY confused ...
