# Consistent Estimation of Pricing Kernels from Noisy Price Data

## Abstract

If pricing kernels are assumed non-negative then the inverse problem of finding the pricing kernel is well-posed. The constrained least squares method provides a consistent estimate of the pricing kernel. When the data are limited, a new method is suggested: relaxed maximization of the relative entropy. This estimator is also consistent. Keywords: $\epsilon$-entropy, non-parametric estimation, pricing kernel, inverse problems.

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File URL: http://arxiv.org/pdf/math/0310223

## Bibliographic Info

Paper provided by arXiv.org in its series Papers with number math/0310223.

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Handle: RePEc:arx:papers:math/0310223

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## Related research

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Find related papers by JEL classification:
• G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
• G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
• C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General

## References

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