Nonparametric Option Pricing with No-Arbitrage Constraints
We propose a completely kernel based method of estimating the call price function or the state price density of options. The new estimator of the call price function fulfills the constraints like monotonicity and convexity given in Breeden and Litzenberger (1978) without necessarily estimating the state price density for an underlying asset price from its option prices. It can be shown that the call price estimator is pointwise consistent and asymptotically normal. The estimator of the state price density is also consistent. In a simulation study we compare the new estimators to the estimators given in Aït-Sahalia and Duarte (2003). Copyright The Author 2008. Published by Oxford University Press. All rights reserved. For permissions, please e-mail: email@example.com., Oxford University Press.
Volume (Year): 7 (2009)
Issue (Month): 2 (Spring)
|Contact details of provider:|| Postal: |
Fax: 01865 267 985
Web page: http://jfec.oxfordjournals.org/
More information through EDIRC
|Order Information:||Web: http://www.oup.co.uk/journals|
When requesting a correction, please mention this item's handle: RePEc:oup:jfinec:v:7:y:2009:i:2:p:53-76. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.