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%T Dynamics of state price densities
%A Härdle, Wolfgang
%A Hlávka, Zdeněk
%J Journal of Econometrics
%N 1
%P 1-15
%V 150
%D 2009
%K Option pricing; State price density; Nonlinear least squares; Constrained estimation; JEL Classification: C13; C14; G13
%= 2011-01-17T15:42:00Z
%~ http://www.peerproject.eu/
%> https://nbn-resolving.org/urn:nbn:de:0168-ssoar-212436
%X 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.
%C NLD
%G en
%9 journal article
%W GESIS - http://www.gesis.org
%~ SSOAR - http://www.ssoar.info