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Nonparametric Methods and Option Pricing

  • Eric Ghysels
  • Valentin Patilea
  • Éric Renault
  • Olivier Torrès

In this paper, we survey some of the recent nonparametric estimation methods which were developed to price derivative contracts. We focus on equity options and start with a so-called model-free approach which incolves very little financial theory. Next we discuss nonparametric and semi-parametric methods of option pricing and illustrate the different approaches. Nous survolons la littérature de l'estimation non-paramétrique de modèles de titres dérivés. En particulier, nous analysons des options sur actions en partant d'une approche qui n'impose pas de restrictions théoriques, telles des restrictions d'arbitrage, et qui est donc purement statistique. Par la suite nous présentons des méthodes qui prennent avantage des restrictions a priori fournies par la théorie.

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Paper provided by CIRANO in its series CIRANO Working Papers with number 97s-19.

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Length: 31 pages
Date of creation: 01 Apr 1997
Date of revision:
Handle: RePEc:cir:cirwor:97s-19
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  1. Yacine Aït-Sahalia & Andrew W. Lo, 1998. "Nonparametric Estimation of State-Price Densities Implicit in Financial Asset Prices," Journal of Finance, American Finance Association, vol. 53(2), pages 499-547, 04.
  2. Hardle, Wolfgang & Linton, Oliver, 1986. "Applied nonparametric methods," Handbook of Econometrics, in: R. F. Engle & D. McFadden (ed.), Handbook of Econometrics, edition 1, volume 4, chapter 38, pages 2295-2339 Elsevier.
  3. Aït-Sahalia, Yacine. & Bickel, Peter J. & Stoker, Thomas M., 1994. "Goodness-of-fit tests for regression using kernel methods," Working papers 3747-94., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  4. GHYSELS, Eric & HARVEY, Andrew & RENAULT, Eric, 1995. "Stochastic Volatility," CORE Discussion Papers 1995069, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. Yacine Ait-Sahalia, 1995. "Nonparametric Pricing of Interest Rate Derivative Securities," NBER Working Papers 5345, National Bureau of Economic Research, Inc.
  6. GARCIA, René & RENAULT, Éric, 1998. "Risk Aversion, Intertemporal Substitution, and Option Pricing," Cahiers de recherche 9801, Universite de Montreal, Departement de sciences economiques.
  7. Hardle, W. & Vieu, P., 1990. "Kernel regression smoothing of time series," CORE Discussion Papers 1990031, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  8. Mark Broadie & Jérôme B. Detemple & Eric Ghysels & Olivier Torrès, 1996. "Nonparametric Estimation of American Options Exercise Boundaries and Call Prices," CIRANO Working Papers 96s-24, CIRANO.
  9. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-54, May-June.
  10. Peter Bossaerts & Pierre Hillion, 1993. "A Test Of A General Equilibrium Stock Option Pricing Model," Mathematical Finance, Wiley Blackwell, vol. 3(4), pages 311-347.
  11. P. BOSSAERTS & C. HAFNER & Wolfgang HÄRDLE, 1996. "Foreign Exchange Rates Have Surprising Volatility," SFB 373 Discussion Papers 1996,68, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  12. repec:fth:inseep:9329 is not listed on IDEAS
  13. Gouriéroux, Christian & Monfort, Alain & Tenreiro, Carlos, 1994. "Kernel m-estimators : non parametric diagnostics for structural models," CEPREMAP Working Papers (Couverture Orange) 9405, CEPREMAP.
  14. repec:dgr:kubcen:199523 is not listed on IDEAS
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