Portfolio Selection and Asset Pricing:

Models of Financial Economics and

Their Applications in Investing Erol
Hakanoglu
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 PORTFOLIO
SELECTION
AND
ASSET PRICING
This page intentionally left blank
 PORTFOLIO
SELECTION
AND
ASSET PRICING
MODELS OF FINANCIAL ECONOMICS AND
THEIR APPLICATIONS IN INVESTING

JAMIL BAZ
HELEN GUO
EROL HAKANOGLU

New York Chicago San Francisco Athens London

Madrid Mexico City Milan New Delhi
Singapore Sydney Toronto
Copyright © 2022 by Jamil Baz, Helen Guo, and Erol Hakanoglu. All rights reserved. Except as per-
mitted under the United States Copyright Act of 1976, no part of this publication may be reproduced
or distributed in any form or by any means, or stored in a database or retrieval system, without the
prior written permission of the publisher.

ISBN: 978-1-26-427016-3
MHID: 1-26-427016-X

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 To Zeina, Maurice, Elena, and Alexandra,
with love and admiration.
J.B.

To Yazhen and Zhijun who gave me life

and Adam and Daniel who gave my life new meaning.
H.G.

To Silvia, Aviva, and Orli, with all my love.

E.H.
This page intentionally left blank
 Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix

Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiii

PART I
Mathematical Foundations
1 Functional Analysis in Real Vector Spaces . . . . . . . . . . . . . . . . . . . . . .3

2 Optimization in Discrete Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25

3 Optimization in Continuous Time . . . . . . . . . . . . . . . . . . . . . . . . . .35

4 Utility Theory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45

5 Uncertainty: Basics of Probability and Statistics . . . . . . . . . . . . . . . . .51

6 Uncertainty: Stochastic Processes and Calculus . . . . . . . . . . . . . . . . .69

PART II
Portfolio Models
7 Single-Period and Continuous-Time Portfolio Choice . . . . . . . . . . . .97

8 An Example of Asset Allocation for a Sovereign . . . . . . . . . . . . . . . .135

9 Liability-Driven Asset Allocation . . . . . . . . . . . . . . . . . . . . . . . . . . .145

vii
viii • Contents

PART III
Asset Pricing
10 Equilibrium Asset Pricing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .161

11 Factor Models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .187

12 Derivatives Pricing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .199

13 Interest Rate Models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .237

14 Risk Premia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .263

PART IV
Asset Allocation in Practice
15 Motivations for Robust Asset Allocation . . . . . . . . . . . . . . . . . . . . .297

16 Risk Budgeting Approach to Asset Allocation . . . . . . . . . . . . . . . . .303

17 Black–Litterman Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .315

18 Shrinkage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .329

19 Robust Optimizers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .345

Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .367

Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 379

Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .393
 Introduction

Portfolio selection and asset pricing are the centerpieces of finance. If there
is any hope to have fundamental theorems in financial economics, these two
topics arguably provide the best opportunity. Yet, because financial markets
constantly involve complex feedback between actors and models, the size of the
gap between the fundamental results of mathematics and physics and those of
finance is humbling.
How do we solve quantitative problems? In the realm of mathematics, we
formulate rigorous theorems and prove their validity with little left to approx-
imation. Chemistry and physics are built on fundamental laws and theorems
that are amenable to rigorous experimental verification, such as Newton’s laws of
motion and thermodynamics, Maxwell’s equations of electricity and magnetism,
and Einstein’s general relativity theory.
When we move away from pure mathematics, in order to formulate and
verify our understanding of nature, we rely on models of reality, built either
physically or as thought experiments. If mathematics lies at one end of the spec-
trum of sciences, economics and finance belong at the other end. In the latter,
the models need to account for quirky human behavior, which at times does not
even obey basic building blocks of logic such as transitivity.
Compared with mathematics or the physical sciences, the fundamental laws
of financial economics are just a valiant attempt to make sense of messy data and
behaviors. We try hard to do the best we can. After all, instead of universal con-
stants such as π, Avogadro’s number N, gravitational constant g, speed of light c,
and Planck’s constant h, we must deal with the short-term interest rate set by a
subordinate deity who runs the Federal Reserve.

ix
x • Introduction

Jorge Luis Borges, a brilliant and sometimes delirious writer of the twentieth
century, imagined a realm where the science of map making becomes so precise
that only a one-to-one scale is acceptable—acceptable but wholly impractical,
even if possible.1 In this book, we will settle for less than perfect models of port-
folios and assets and their interconnections.

Asset Pricing
Asset pricing is about connecting payoffs in future states of the world with
the right discount rate. Most interesting pricing problems involve uncertainty
around these states of the world and a stochastic discount rate.
In pricing assets, general equilibrium models and consumption-based models
help us determine prices for assets based on fundamental risk factors in the econ-
omy, such as the capital asset pricing model and the family of models derived
from it. Financial markets abound with observable prices for a plethora of assets.
Some assets are more easily valued relative to their observably priced reference
assets. The Black–Scholes–Merton option pricing model exemplifies these type
of valuation methodologies.

Portfolio Selection
From the management of pension funds to personal finances, from corporate
capital structure management to sovereign asset-liability management, from
insurance company asset portfolio management to endowment and sovereign
wealth fund management, literally billions of people around the globe directly
or indirectly depend on portfolio selection. We will attempt to present the fun-
damentals of portfolio selection that evolved into an impressive body of work
over the past seven decades.
Once the groundwork is laid, we will discuss portfolio selection theories
in depth, studying their interconnections and differences. The efficacy of any
model hinges on its theoretical construct and on the realism and accuracy of its
inputs. We focus on statistical approaches that help us attain that realism and
accuracy, such as robust estimation. In discussing implementation issues, we

1 J. L. Borges, “On Exactitude in Science,” in A Universal History of Infamy. New York: Penguin, 1975.
 Introduction • xi

will describe the leading methodologies in the field and differentiate between
them critically.

...

The finance literature is home to a vast number of texts on asset pricing and
portfolio selection. The focus of these texts is mostly on only one of the two;
in only a few cases are both considered together. Our aim is to take the latter
approach while demonstrating pathways from one to the other and vice versa
and while treating theory and applications holistically.
You should be familiar with the language of mathematics to get the best
out of this book. We assume competence in the fundamentals of multivariate
calculus, differential equations, linear algebra, probability, and statistics. Having
said that, Part I of this text is dedicated to a review and extension of these fun-
damentals. If you are familiar with relevant topics, you can skim through Part I
and jump to Part II without missing the essence of this book.
The intended audience of this text includes advanced undergraduates in
mathematics, economics, finance, and engineering; MBA students with a
quantitative bent; students in financial engineering master’s programs; doctoral
students in mathematical economics, finance, and financial engineering; and
practitioners in the financial industry interested in quantitative finance and
economics.
This book is divided in four parts. Even though they could be appreciated
independently, we believe that going through each individually is most benefi-
cial. We have written the chapters so that they are as self-contained as practically
possible. In this spirit, each chapter has a summary of contents up front. We
outline the four parts as follows:
In Part I, we lay out the mathematical foundations of the theories and prac-
tical applications that make up the rest of the text. The idea is to provide a
compact introduction to many concepts of mathematical analysis that lurk in
the background, sometimes hardly visible yet fundamental to the development
of modern finance. We rely on well-known texts in summarizing definitions,
theorems, and their proofs, which we believe promote a thorough understand-
ing of what follows.
In Part II, we cover portfolio selection models. The fundamental concepts and
theories are laid out in detail in single-period and continuous-time settings. In
what we believe is an interestingly novel treatment, the last section of Chapter 7
xii • Introduction

is dedicated to analogies and correspondences between the concepts and theories

discussed in earlier chapters.
In Part III, we describe the fundamental theories and concepts behind asset
pricing, starting with equilibrium models and moving on to factor models
before delving into derivatives pricing from the simple to the exotic. In this
part, we also focus on interest-rate models and derivatives pricing associated
with fixed-income markets. The part concludes with the intricate concept of
risk premia.
Part IV is where we move to the practice of portfolio selection. Despite the
intuitive appeal of many quantitative models, over the years we have observed
that practitioners are often reluctant to apply them in practice. In this part, we
analyze the key issues methodically and offer solutions that have had a good
track record in practice.
It’s important in any book to appeal to readers. Italo Calvino, a true Italian
master of literature who embodied the word simpatico, was asked to deliver the
1985 Norton Lectures at Harvard. The honor led to the writing of his ultimate
book, Six Memos for the Next Millennium, a compendium of six lectures, each
addressing a quintessential quality for a writer to impart on a text: lightness,
quickness, exactitude, visibility, multiplicity, and consistency.2 We tried to abide
by all six, yet it is the first lecture from the sextet that we took to heart as we tried
to lighten the weight from the narrative as much as we could.

2 I. Calvino, Six Memos for the New Millennium. Boston: Harvard University Press, 1988. Italo Calvino
passed away just before completing the final “memo” and could not actually deliver the much-anticipated
lectures in September 1985.
 Acknowledgments

We start by extending special thanks to Emmanuel Roman for his friendship.

The coauthors would not have met without his intercession, and this project
owes much to his encouragement and intelligent guidance.
Robert Merton had a profound influence on the authors and hence on this
manuscript. His work was foundational in every aspect of asset pricing, deriva-
tives, and portfolio theory. We are, as ever, in his debt.
We are beholden to many people who have helped us in our intellectual for-
mation, our professional growth, and our life journey. We thank them from our
hearts and minds.
First are our teachers, some of whom have left us: Takeshi Amemiya,
Kenneth Arrow, Fischer Black, Michael Boskin, Roger Brockett, Robert
Dorfman, Robert Ferrandier, Harry Gregor, Yu-Chi Ho, Lawrence Lau, John
Lintner, Andrew Lo, Franco Modigliani, Peter Rogers, and Jean-Luc Vila.
Then there are our colleagues past and present: Ramasastry Ambarish, Armen
Avanessians, Driss Ben Brahim, Jonathan Berk, Thomas Brennan, Eric Briys, Terry
Burnham, Jean-Paul Calamaro, George Chacko, Josh Davis, Sanjiv Das, François
Degeorge, Ludovic Feuillet, Normane Gillmann, Nick Granger, Mahmoud
Hajo, Campbell Harvey, Lloyd Han, Dan Ivascyn, Soraya Kazziha, Sean Klein,
Vincent Koen, Sudi Mariappa, René Martel, Ravi Mattu, Scott McDermott,
Nikola Miljkovic, Ben Mills, Arun Muralidhar, Vasant Naik, Michael Pascutti,
Brian Pinto,Vlad Putyatin, Scott Pinkus, German Ramirez, Steve Sapra, Lester
Seigel, Nassim Taleb, Jason Tilroe, Jerry Tsai, Emmin Shung, Sadek Wahba, Larry
Wieseneck, Richard Witten, Francis Yared, Ziqi Zhang, and Wentao Zhao.

xiii
xiv • Acknowledgments

We cannot stop thanking our colleague Zhifeng Wang for an incredible

amount of excellent work that went into this book throughout the process,
improving its quality significantly. Our colleague Tarek Nassar pored through
the manuscript with diligence and provided us with excellent suggestions. As
such, they both have to take responsibility for all remaining mistakes.
We also thank our colleague Tony Crescenzi for introducing us to McGraw Hill
and Stephen Isaacs and Judith Newlin for being the best editors any author could
ever hope to have on their side. Our thanks also go to Patricia Wallenburg from
TypeWriting who has done a terrific job in the many aspects of the production of
this book.
We are immensely thankful to our families for all the love and support they
have given us throughout our lives and during this project in particular.
This book came together in a most difficult year. The pandemic took a lot from
all of us. We consider ourselves lucky to have worked together so harmoniously
while getting to know each other more throughout the process. We acknowledge
the tremendous support we found in each other throughout our adventure. In
particular, we shared movies as a means of sustenance. Films by Robert Bresson,
Carl Dreyer, Krzysztof Kieślowski, Yasujirō Ozu, Andrei Tarkovsky, and Béla
Tarr gave us ample food for thought, and discussing them helped keep our spir-
its up. Also, we owe film directors Ernst Lubitsch and Billy Wilder many gifts of
laughter. We marveled at the wit and lightness of these emigrants from central
Europe who understood so much about their time and society.
 PORTFOLIO
SELECTION
AND
ASSET PRICING
This page intentionally left blank
 PART I

Mathematical
Foundations
This page intentionally left blank
 1
Functional Analysis in
Real Vector Spaces

Summary
The primary mathematical idea behind portfolio selection theory and
practice is optimization. Functional analysis, which is the study of vector
spaces in finite and infinite dimensions using concepts and insights from
linear algebra, analysis, and geometry, serves as the mathematical basis for
theories and optimization models of portfolio selection.1 Representation,
projection, duality, extension, and separating-hyperplane theorems form
the analytic basis for a significant portion of resource and asset allocation,
planning, optimal control, approximation, and estimation problems in
financial economics. Optimization theory could be developed in finite-
dimensional Euclidean space using elementary geometric concepts and
intuitions. As the complexity of the underlying problems increases, exten-
sion to infinite-dimensional spaces becomes indispensable.

1 The following are standard symbolic abbreviations used throughout this part: ∀ is “for all”; ∈ is “in”;
∋ is “such that”; ∃ is “there exists”; ≡ is “defined as”; ≠ is “not equal to”; ∄ is “there does not exist”; ∅ is
“empty set”; ∩ is “intersection”; ∪ is “union”; ⊂ is “subset”;  is “implies”; ↔ is “if and only if ”; and ■
is “quod erat demonstrandum” or “QED,” which means “that which has been proven.”

3
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 Thora laski poskensa hänen kutreillensa sulkien silmänsä.
Hiljainen onnen, autuaallisuuden hohde kirkasti koko hänen
olentonsa…

Oliko tämä totta? Vai uneksiko hän jälleen? —

*****

— Vai aioit sinä toimittaa minulle nuoren vaimon, kuiskasi hän.

Thora nauroi, mutta hänen naurussansa soinnahteli kiihkeä

hellyys.

— Sinähän olit lakannut ajattelemasta minua… et minua enää

nähnyt, et kuullut — senhän kyllä huomasin!

— Ja kumminkin keskittyi kaikki sinuun… olit käynyt muistoksi…

Enhän voinut käsittää muuta kuin että olit hylännyt minut ainiaaksi.
Silloin kun sinä sanoit, ettet voisi enää koskaan luottaa minuun,
silloin tunsin kadottaneeni sinut kokonaan. Tunsin mielessäni kuin
kalman kylmää.

— Anna minulle anteeksi! — Hän sulkeutui hänen syliinsä.

— Ja nyt minä tulen, kuiskasi Samuel Stern, — anomaan sinulta

lämpöä ja suojaa — suotko niitä minulle?

— Ei, minähän tulen sinun luoksesi, pyytäen että päästäisit minut

sisään, — sinne, missä äitisikin on. Tahdon istua hänen jalkojensa
juuressa ja oppia hänestä! Itse olen saanut kärsiä enin siitä etten
tullut ennen!
 — Tiedätkö, kuiskasi hän hetkisen kuluttua, — jos en olisi ollut niin
varmasti vakuutettu, että sinä olit unohtanut minut, niin en tiedä
olisinko voinut sanoa sinulle sen mitä sanoin.

— Sittenhän minulla on syytä iloita arvokkaasta käytöksestäni.

Mutta älkäämme enää ajatelko sitä asiaa. En nyt jälkeenpäin yhtään
käsitä, kuinka kaikki oikein tapahtui.

Mutta äkkiä tunsi Thora mielensä masentuvan. Hän irroittihe

Samuel
Sternin syleilystä.

— Mutta kaikki johtui siis ainoastaan pelkästä sattumasta?

— Mitä sinä tarkoitat? Älä puhu halveksivasti niinsanotuista

sattumista. Ne ne juuri muovailevat meidän kohtalomme! — —
Ethän toki aikone jälleen lähteä tiehesi?

Hän pusersi Thoran kiihkeästi povellensa ja painoi päänsä hänen

olallensa.

— Et voi uskoa kuinka köyhän, palelevan miehen on ihanaa saada

tulla sisään!

Mutta Thora ei voinut vapautua ajatuksistansa.

— Mutta muutoin sinä olisit matkustanut pois!… Olisit lähtenyt

minun luotani?

Samuel Stern katsoi häneen lempeän nuhtelevasti.

— Enhän tiennyt muutakaan neuvoa, rakkaani! Muista, että olit

itse saattanut asiat sille kannalle! Laupiaana enkelinä esiintymisesi
oli aivan eri asia. — Mutta kenties olisin sittenkin palannut
katsomaan, olitko sinä vielä täällä.

— Mutta minua pahoittaa tosiaankin, ettet sinä saanut nuorta,

hilpeätä ja raikasta pikku vaimoa…

Samuel Stern laski kätensä hänen suullensa. Hän tarttui siihen ja

suuteli sitä.

— Niin, nähnethän sinä, että minä olen tullut vanhaksi, niin

vanhaksi, että minun pitäisi olla aivan harmaa.

— Pikku lapsi, sinä et käsitä ollenkaan mitä rakkaus on!… Jos

sinä olisit niin vanha, ettei sinulla olisi enää elettävänä kuin yksi
ainoa päivä, niin iloitsisin, jos ehtisin luoksesi, niin että saisimme
elää sen päivän yhdessä. Ja jos meillä ei olisi muuta kuin tämä lyhyt
hetkinen, niin en vaihtaisi sitä pitkään elämään nuoren vaimon
seurassa!

Hän nauroi, sulki Thoran molemmat kädet omiinsa ja suuteli niitä.

— Arvaan että haluaisit olla seitsentoistavuotias kuten muinoin.

Mutta onneksi ei ole niin!… Tahdon uskoa sinulle muutaman seikan:
sitä onnea, jonka tänään olen voittanut, en vaihda, en
seitsemääntoista vuoteen, en mihinkään vähempiarvoiseen… Etkö
tunne kuinka paljon arvokkaammaksi se on muuttunut, — se on
kallisarvoisen viinin kaltainen, joka säästössä yhä paranee, se tulee
pysymään muuttumatonna kuin raskas, punainen kulta. — — —

— Sanot että on myöhäistä! Siunaus ei tule koskaan liian

myöhään. Mihin aikaan elämästä se tulleekin, on se parasta mitä voi
tulla osaksemme. Mutta mitä nyt?
 Thoran katse oli käynyt surulliseksi. Siinä oli jäljellä jotain hänen
kärsimyksistänsä, hänen kyynelistään, — kuin vienoa kaihoa.

— Mitä ajattelet? kysyi Samuel Stern hiljaa.

— Minua vaivaa omatuntoni. Oletko antanut anteeksi, että

elämämme on mennyt hukkaan?

Samuel Stern sulki hänet lempeästi syliinsä. — Oletko sinä

antanut anteeksi minulle? »Vuosikausia olen ihmetellyt, kuinka voin
tehdä sillä tavoin… Ja elämämme ei ole mennyt hukkaan, se
hymyilee meille sinun hymyilyssäsi. Kun suljen sinut syliini, on elämä
luonamme.

Thora katsoi häneen, peläten antautuvansa ennen aikojaan onnen

valtaan.

— Ah, Samuel, tahtoisin että näkisit kaikki oikeassa

valaistuksessa.
Sitä et sinä tee.

Samuel Stern katsoi syvälle hänen silmiinsä.

— Sano vain että tunnet olevasi turvassa minun tykönäni! pyysi

hän. —
Sano se!…

— Katsos, nyt on nuoruutemme palannut jälleen. Mutta totta on,

että olen odottanut sinua. Miksi viivyit niin kauan? — — Ja
muistatko, kuinka puro lirisi ja kohisi kuusten alla… Täällä suhisee
vielä tuo vanha kuusi ja puro lirisee ja kohisee ja kuiskii… Muistatko
vielä?
 — Niin, me toivoimme että ajan kulku pysähtyisi!

— Niin, nyt on tuo aika palannut!

— Niin kyllä! kuiskasi Thora, mutta hänen silmänsä kyyneltyivät.

Hän kääntyi poispäin, ettei Samuel Stern huomaisi sitä.

Voiko olla totta, että he vihdoinkin olivat löytäneet toisensa? Että

Samuel Stern oli hänen luonansa ja etteivät he eroaisi enää
koskaan?

Kuinka onnellinen Thora olikaan kuullessaan hänen äänensä ja

hänen hiljaisen hengityksensä! Hän oli saanut takaisin hymyilynsä ja
tuon lempeän suunilmeen.

— Thora! Tiedätkö millainen nimi sinulla on? Se on

tummansininen ja salaperäinen kuin tuo kaukainen tunturi… ja siitä
säteilee salattua päivänpaistetta — kuten sinusta itsestäsi.

Hän kumartui Thoraa kohden. — Thora, mitä sinä mietit?

— Ajatukseni ovat pysähtyneet, en mieti mitään.

— Se johtuu siitä että kesä yhä jatkuu!… Täällä sataa ruusuja ja

päivä paistaa… ja sinä olet täällä! Et ole sittenkään seitsemäätoista
vanhempi. Minä kiitän Jumalaa sinusta!

— Ah, Samuel, näet väärin!

— Ei, minä näen että sinä olet palannut luokseni — — ja siitä

tahdon kiittää polvillani joka päivä… et aavastakaan kuinka usein
olen kaihonnut saada edes koskea käteesi! Miksi suljet silmäsi?
 — Niitä häikäisee… Minua häikäisee valovirran tavoin se että olen
luonasi!… Jos olet onnellinen, on kaikki autuaallista! Sinun tykönäsi
on lämpöä ja kaikkea hyvää. Minä olen palelluksissani, olen vihdoin
löytänyt kotiin! Sano vielä kerran, Samuel, että pidät minusta, vielä
kerran! Janoan niitä sanoja, tiedän että puhut totta! — — —

Hiljaisuus ympäröi heitä. Ainoastaan järveltä kuului airojen

loisketta yksinäiseltä veneeltä.

Oli kuin korkea kirkko olisi kaartunut heidän ylitsensä pyhässä

hiljaisuudessa…

Thora istui hymyhuulin. Riemu valtasi hänen mielensä — syvä,

vavahteleva riemu.

Heistä oli molemmista niin ihanaa vain istua yhdessä, tietäen

etteivät he enää eroaisi.

Vain silloin tällöin täytyi Samuel Sternin sanoa joku sana. Sitten
vallitsi jälleen hiljaisuus.

Sitten täytyi taas Thoran sanoa jotain, tullaksensa vakuutetuksi

ettei tuo kaikki ollut unta vain.

Hänen siinä istuessansa olivat hänen kasvonsa muuttuneet.

Synkät piirteet olivat kirkastuneet. Niihin oli tullut uusi, onnellinen
ilme. —

— Samuel, minun täytyy uudelleen kysyä sinulta jotakin. Pidätkö

sinä todellakin minusta?… Minusta se on niin ihmeellistä, — minun
täytyy kysyä sitä yhä uudelleen! —
 Samuel Stern ei vastannut. Hän teki vain puolestansa myöskin
muutamia typeriä pikku kysymyksiä, joissa ei ollut rahtuakaan järkeä,
vaan jotka syvästi liikuttivat Thoraa.

— Sinä unohdat kaikki nuo vuodet, jotka ovat menneet menojaan,

Samuel!

— Minun nimeni kuuluu niin toisenlaiselta, kun sinä lausut sen!

Siitä tulee uusi nimi. Se kajahtaa niin vienolta ja syvälliseltä, niin
pehmoiselta ja onnekkaalta! Sano se vielä uudelleen! Ennen et
lausunut sitä sillä tavoin — et sellaisella äänensävyllä! — — —

— Ja entä valkoinen puku, joka sinulla oli ylläsi, kun läksit luotani
— minne se on joutunut? Juuri sellainen puku pitää sinulla olla, kun
tulet omakseni — niin että minä tiedän sinun palanneen!

— Mutta Samuel, silloinhan kaikki ihmiset nauravat minulle!

— Mitä se meitä haittaa, jos he nauravatkin! Voitko sanoa?

Sitä ei Thora voinut.

— Mutta sanopa sinä vuorostasi muuan seikka, jota olen aivan

unohtanut kysyä: voitko sinä rakastaa minua? Voitko ainaiseksi
sulkea minut sydämeesi? Muistatko satuja, joita täällä kerroimme
toisillemme? Tämä on paras niistä kaikista!

— Ja tässä on meillä kukkasia yltympäri! Tässä on akanhammas

ja päivännouto ja silmäruoho. Katsos, kuinka ne ovat hienosti puetut.
Oletko kutsunut ne tänään juhlaan?

— Ja täällähän sinikellosikin ovat. Kuuletko niiden äänen?

 Thora nauroi: — Aioin juuri kysyä, kuulitko sinä sen!

— Kuinka sinun naurusi on vienoa ja kaunista! Et tiedä itse, kuinka

kaunista se on ja kuinka se nuorentaa pikku kasvojasi! Mitä sinä
sanot?

— En yhtään mitään. En saa esiin mitään — minulla on niin paljon

sanottavaa!

— Kuuletko, kuinka hongat suhisevat tuolla kankaalla? En

koskaan ole kuullut metsän suhisevan sillä tavoin kuin tänään!… Ja
tässä tulee veljemme tuulonen. Yhtykäämme ylistyslauluun tuulen ja
pauhun, myrskyn ja tyvenen, siskomme kuun ja kaikkein valkoisten
pikku tähtösten kunniaksi! — Ylistäkäämme elämää!

Samuel Stern kävi rauhattomaksi, sillä Thora oli niin kalpea. Hän
veti varovasti pienen vaipan hänen ympärilleen.

— Olet väsynyt. Sinun pitää istua aivan hiljaa.

Thora hymyili. — Tahdon ajatella sinua!

Hän painautui Samuel Sternin povelle.

— Sano jotain! On niin ihanaa kuulla sinun puhuvan!

Samuel Stern istui kuiskaillen hänen kanssaan, mutta hiukan vain,

että hän lepäisi paremmin.

Thora vastasi joka kerran hymyilyllä.

Äkkiä hän kohottautui suoremmaksi.

— Samuel, minun pitää vielä kysyä sinulta jotakin.

 Samuel Stern veti hänet povellensa.

— Olethan Sanpriel! kuiskasi hän.

Thora ei kysellyt enää.

Nyt tuli Susi heidän luoksensa. Se heristi korviansa ja katsoi heitä

tarkkaavasti kesyttömillä ruskeilla silmillänsä. Sitten se paneutui
maahan häntäänsä liehutellen, vakuutettuna että kaikki oli juuri
kohdallaan.

— Nyt lankeaa kaste maahan. Nyt soivat iltakellot, kehottaen

kaikkia yhtymään iltaruskon kiitoslauluun!

— Kuulen sen! sanoi Thora, sulkien kätensä hänen käteensä.

Hopeansininen sumu laskeutui harjanteille. Se leveni yli järven ja

tunturien. Metsät painuivat pimeään.

He katsoivat, kuinka aurinko vaipui nummen hämärään.

Hiljaa ja huomaamatta oli kuu ilmaantunut taivaalle. Se oli alhaalla

taivaanrannassa ja loi vaaleata hopeanhohdetta. Säteet väreilivät —
kuin soittimen kielet soittoniekan niitä käytellessä.

Tuuli oli viileän puhdas, kuin tulisi se iäisyyden mailta.

— Mitä kuiskivat kaikki nuo kukkaset?

Thora vastasi hymyillen:

— Enkeli käy yli kaiken maan ja tuo meille tervehdyksensä.

 Hänen katseeseensa tuli juhlallinen ilme. Autuaallisuus täytti
hänen mielensä.

Hänestä tuntui, kuin ei hänen sydämensä kestäisi — kuin täytyisi

hänen menehtyä onneen!…

Taivas oli hehkunut kultaisin liekein, jotka leijailivat ja sammuivat.

Ja sitten tulvahti esiin punertava valomeri säteillen tummimmasta

purppurasta hennoimpaan valkohohteeseen.

Ikuinen lumi hehkui tulessa, nummi peittyi veripunaan.

Mutta tunturien ja harjojen yläpuolella vallitsi häikäisevä kirkkaus.

Heistä oli kuin olisivat he saaneet ohi tähtien luoda katseen

loppumattomaan iäisyyteen.

Ja siellä liiteli ihmeellisiä, hienoja kukkasia, joiden väreille ei

kukaan ole keksinyt nimeä. Oli kuin näkisivät he valkosiipien
välkkeen… lähetin kirkkauden mailta!…

Vavahdus kävi läpi Thoran olennon. Ihanan haaveen vallassa hän

kuiskasi:

— Samuel! Äitisi on avannut meille tien luvattuun maahan!

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