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Estimation of risk-neutral densities using positive convolution approximation

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  • Bondarenko, Oleg
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    Article provided by Elsevier in its journal Journal of Econometrics.

    Volume (Year): 116 (2003)
    Issue (Month): 1-2 ()
    Pages: 85-112

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    Handle: RePEc:eee:econom:v:116:y:2003:i:1-2:p:85-112

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    7. Rosenberg, Joshua V., 1998. "Pricing multivariate contingent claims using estimated risk-neutral density functions," Journal of International Money and Finance, Elsevier, Elsevier, vol. 17(2), pages 229-247, April.
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    9. Melick, William R. & Thomas, Charles P., 1997. "Recovering an Asset's Implied PDF from Option Prices: An Application to Crude Oil during the Gulf Crisis," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 32(01), pages 91-115, March.
    10. Peter A. Abken & Dilip B. Madan & Sailesh Ramamurtie, 1996. "Estimation of risk-neutral and statistical densities by Hermite polynomial approximation: with an application to Eurodollar futures options," Working Paper, Federal Reserve Bank of Atlanta 96-5, Federal Reserve Bank of Atlanta.
    11. Söderlind, Paul, 1997. "Market Expectations in the UK Before and After the ERM Crisis," Working Paper Series in Economics and Finance 210, Stockholm School of Economics, revised 01 Sep 1998.
    12. Söderlind, Paul & Svensson, Lars E O, 1997. "New Techniques to Extract Market Expectations from Financial Instruments," CEPR Discussion Papers 1556, C.E.P.R. Discussion Papers.
    13. Ait-Sahalia, Yacine & Lo, Andrew W., 2000. "Nonparametric risk management and implied risk aversion," Journal of Econometrics, Elsevier, Elsevier, vol. 94(1-2), pages 9-51.
    14. Rubinstein, Mark, 1994. " Implied Binomial Trees," Journal of Finance, American Finance Association, vol. 49(3), pages 771-818, July.
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    16. Bhupinder Bahra, 1997. "Implied risk-neutral probability density functions from option prices: theory and application," Bank of England working papers 66, Bank of England.
    17. Mark Rubinstein., 1994. "Implied Binomial Trees," Research Program in Finance Working Papers, University of California at Berkeley RPF-232, University of California at Berkeley.
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    22. Bernard Dumas & Jeff Fleming & Robert E. Whaley, 1998. "Implied Volatility Functions: Empirical Tests," Journal of Finance, American Finance Association, vol. 53(6), pages 2059-2106, December.
    23. Cox, John C. & Ross, Stephen A., 1976. "The valuation of options for alternative stochastic processes," Journal of Financial Economics, Elsevier, Elsevier, vol. 3(1-2), pages 145-166.
    24. Breeden, Douglas T & Litzenberger, Robert H, 1978. "Prices of State-contingent Claims Implicit in Option Prices," The Journal of Business, University of Chicago Press, vol. 51(4), pages 621-51, October.
    25. Ross, Stephen A, 1976. "Options and Efficiency," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 90(1), pages 75-89, February.
    26. Campa, Jose M. & Chang, P. H. Kevin & Reider, Robert L., 1998. "Implied exchange rate distributions: evidence from OTC option markets1," Journal of International Money and Finance, Elsevier, Elsevier, vol. 17(1), pages 117-160, February.
    27. Michael P. Leahy & Charles P. Thomas, 1996. "The sovereignty option: the Quebec referendum and market views on the Canadian dollar," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 555, Board of Governors of the Federal Reserve System (U.S.).
    28. Bliss, Robert R. & Panigirtzoglou, Nikolaos, 2002. "Testing the stability of implied probability density functions," Journal of Banking & Finance, Elsevier, vol. 26(2-3), pages 381-422, March.
    29. Campa, Jose Manuel & Chang, P H Kevin, 1996. "Arbitrage-Based Tests of Target-Zone Credibility: Evidence from ERM Cross-Rate Options," American Economic Review, American Economic Association, vol. 86(4), pages 726-40, September.
    30. Stutzer, Michael, 1996. " A Simple Nonparametric Approach to Derivative Security Valuation," Journal of Finance, American Finance Association, vol. 51(5), pages 1633-52, December.
    31. Dilip B. Madan & Frank Milne, 1994. "Contingent Claims Valued And Hedged By Pricing And Investing In A Basis," Mathematical Finance, Wiley Blackwell, Wiley Blackwell, vol. 4(3), pages 223-245.
    32. Buchen, Peter W. & Kelly, Michael, 1996. "The Maximum Entropy Distribution of an Asset Inferred from Option Prices," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 31(01), pages 143-159, March.
    33. René Garcia & Ramazan Gençay, 1998. "Pricing and Hedging Derivative Securities with Neural Networks and a Homogeneity Hint," CIRANO Working Papers 98s-35, CIRANO.
    34. Andreas Gottschling & Christian Haefke & Halbert White, 2000. "Closed Form Integration of Artificial Neural Networks with Some Applications to Finance," Econometric Society World Congress 2000 Contributed Papers 1080, Econometric Society.
    35. Hull, John C & White, Alan D, 1987. " The Pricing of Options on Assets with Stochastic Volatilities," Journal of Finance, American Finance Association, vol. 42(2), pages 281-300, June.
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    Citations

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    Cited by:
    1. Marian Micu, 2005. "Extracting expectations from currency option prices: a comparison of methods," Computing in Economics and Finance 2005, Society for Computational Economics 226, Society for Computational Economics.
    2. Härdle, Wolfgang & Hlávka, Zdenek, 2009. "Dynamics of state price densities," Journal of Econometrics, Elsevier, Elsevier, vol. 150(1), pages 1-15, May.
    3. René Garcia & Eric Ghysels & Éric Renault, 2004. "The Econometrics of Option Pricing," CIRANO Working Papers 2004s-04, CIRANO.
    4. Jarno Talponen, 2013. "On static hedging, real options and valuation of cash flows with skewed distributions," Papers 1312.4227, arXiv.org.
    5. Vladislav Kargin, 2003. "Consistent Estimation of Pricing Kernels from Noisy Price Data," Finance, EconWPA 0311001, EconWPA.
    6. Li, Minqiang, 2008. "Price Deviations of S&P 500 Index Options from the Black-Scholes Formula Follow a Simple Pattern," MPRA Paper 11530, University Library of Munich, Germany.
    7. Peter Christoffersen & Kris Jacobs & Bo Young Chang, 2011. "Forecasting with Option Implied Information," CREATES Research Papers 2011-46, School of Economics and Management, University of Aarhus.
    8. Torben G. Andersen & Oleg Bondarenko, 2007. "Construction and Interpretation of Model-Free Implied Volatility," NBER Working Papers 13449, National Bureau of Economic Research, Inc.
    9. Jean-Baptiste Monnier, 2013. "Technical report : Risk-neutral density recovery via spectral analysis," Papers 1302.2567, arXiv.org.
    10. Laurini, Márcio P., 2007. "Imposing No-Arbitrage Conditions In Implied Volatility Surfaces Using Constrained Smoothing Splines," Insper Working Papers, Insper Working Paper, Insper Instituto de Ensino e Pesquisa wpe_89, Insper Working Paper, Insper Instituto de Ensino e Pesquisa.
    11. Francisco Alonso & Roberto Blanco & Gonzalo Rubio, 2006. "Option-implied preferences adjustments, density forecasts, and the equity risk premium," Banco de Espa�a Working Papers 0630, Banco de Espa�a.
    12. Fengler, Matthias & Hin, Lin-Yee, 2011. "Semi-nonparametric estimation of the call price surface under strike and time-to-expiry no-arbitrage constraints," Economics Working Paper Series 1136, University of St. Gallen, School of Economics and Political Science, revised May 2013.
    13. Duca, Ioana Andreea & Ruxanda, Gheorghe, 2013. "A View on the Risk-Neutral Density Forecasting of the Dax30 Returns," Journal for Economic Forecasting, Institute for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 101-114, June.
    14. A. Monteiro & R. Tütüncü & L. Vicente, 2011. "Estimation of risk-neutral density surfaces," Computational Management Science, Springer, vol. 8(4), pages 387-414, November.
    15. Francisco Alonso & Roberto Blanco & Gonzalo Rubio, 2005. "Testing the forecasting performace of IBEX 35 option implied risk neutral densities," Banco de Espa�a Working Papers 0504, Banco de Espa�a.

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