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Dynamics of state price densities


Härdle, Wolfgang; Hlávka, Zdeněk


Bitte beziehen Sie sich beim Zitieren dieses Dokumentes immer auf folgenden Persistent Identifier (PID):http://nbn-resolving.de/urn:nbn:de:0168-ssoar-212436

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Abstract State price densities (SPDs) are an important element in applied quantitative finance. In a Black-Scholes world they are lognormal distributions but in practice volatility changes and the distribution deviates from log-normality. In order to study the degree of this deviation, we estimate SPDs using EUREX option data on the DAX index via a nonparametric estimator of the second derivative of the (European) call pricing function. The estimator is constrained so as to satisfy no-arbitrage constraints and corrects for the intraday covariance structure in option prices. In contrast to existing methods, we do not use any parametric or smoothness assumptions.
Klassifikation Wirtschaftsstatistik, Ökonometrie, Wirtschaftsinformatik
Freie Schlagwörter Option pricing; State price density; Nonlinear least squares; Constrained estimation; JEL Classification: C13; C14; G13
Sprache Dokument Englisch
Publikationsjahr 2009
Seitenangabe S. 1-15
Zeitschriftentitel Journal of Econometrics, 150 (2009) 1
DOI http://dx.doi.org/10.1016/j.jeconom.2009.01.005
Status Postprint; begutachtet (peer reviewed)
Lizenz PEER Licence Agreement (applicable only to documents from PEER project)