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Maximum entropy distributions inferred from option portfolios on an asset

Author

Listed:
  • Cassio Neri

    ()

  • Lorenz Schneider

    ()

Abstract

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Suggested Citation

  • Cassio Neri & Lorenz Schneider, 2012. "Maximum entropy distributions inferred from option portfolios on an asset," Finance and Stochastics, Springer, vol. 16(2), pages 293-318, April.
  • Handle: RePEc:spr:finsto:v:16:y:2012:i:2:p:293-318
    DOI: 10.1007/s00780-011-0167-7
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    File URL: http://hdl.handle.net/10.1007/s00780-011-0167-7
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    References listed on IDEAS

    as
    1. 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.
    2. Joshua Coval & Jakub Jurek & Erik Stafford, 2009. "The Economics of Structured Finance," Journal of Economic Perspectives, American Economic Association, vol. 23(1), pages 3-25, Winter.
    3. Marco Frittelli, 2000. "The Minimal Entropy Martingale Measure and the Valuation Problem in Incomplete Markets," Mathematical Finance, Wiley Blackwell, vol. 10(1), pages 39-52.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Cassio Neri & Lorenz Schneider, 2012. "A Note on "A Family of Maximum Entropy Densities Matching Call Option Prices"," Papers 1212.4279, arXiv.org.
    2. repec:kap:revdev:v:21:y:2018:i:1:d:10.1007_s11147-017-9132-8 is not listed on IDEAS
    3. repec:eee:apmaco:v:258:y:2015:i:c:p:372-387 is not listed on IDEAS
    4. Sylvia Gottschalk, 2016. "Entropy and credit risk in highly correlated markets," Papers 1604.07042, arXiv.org.
    5. repec:spr:joptap:v:161:y:2014:i:1:d:10.1007_s10957-013-0349-x is not listed on IDEAS
    6. Gottschalk, Sylvia, 2017. "Entropy measure of credit risk in highly correlated markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 478(C), pages 11-19.
    7. Vilsmeier, Johannes, 2014. "Updating the option implied probability of default methodology," Discussion Papers 43/2014, Deutsche Bundesbank.

    More about this item

    Keywords

    Entropy; Information theory; I-divergence; Asset distribution; Option pricing; Volatility smile; 91B24; 91B28; 91B70; 94A17; C16; C63; G13;

    JEL classification:

    • C16 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Econometric and Statistical Methods; Specific Distributions
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

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