Constrained General Regression in Pseudo-Sobolev Spaces with Application to Option Pricing
AbstractState price density (SPD) contains important information concerning market expectations. In existing literature, a constrained estimator of the SPD is found by nonlinear least squares in a suitable Sobolev space. We improve the behavior of this estimator by implementing a covariance structure taking into account the time of the trade and by considering simultaneously both the observed Put and Call option prices.
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Bibliographic InfoPaper provided by Sonderforschungsbereich 649, Humboldt University, Berlin, Germany in its series SFB 649 Discussion Papers with number SFB649DP2006-069.
Length: 50 pages
Date of creation: Sep 2006
Date of revision:
isotonic regression; Sobolev spaces; monotonicity; multiple observations; covariance structure; option price;
Find related papers by JEL classification:
- C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
- C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
- C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
- C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General
- C88 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Other Computer Software
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-09-30 (All new papers)
- NEP-ECM-2006-09-30 (Econometrics)
- NEP-FIN-2006-09-30 (Finance)
- NEP-FMK-2006-09-30 (Financial Markets)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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SFB 649 Discussion Papers
SFB649DP2005-021, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
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