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Nonparametric methods and option pricing

  • GHYSELS, Eric

    ()

    (Pennsylvania State University and CIRANO)

  • PATILEA, Valentin

    ()

    (Institut de Statistique, Université catholique de Louvain, Louvain-la-Neuve, Belgium)

  • RENAULT, Eric

    (GREMAQ and IDEI, Université des Sciences Sociales de Toulouse and Institut Universitaire de France)

  • TORRES, Olivier

    ()

    (GREMARS, Université de Lille 3)

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 involves very little financial theory. Next we discuss nonparametric and semi-parametric methods of option pricing and illustrate the different approaches.

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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 1997075.

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Date of creation: 01 Oct 1997
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Handle: RePEc:cor:louvco:1997075
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  1. Garcia, R. & Renault, E., 1998. "Risk Aversion, Intertemporal Substitution, and Option Pricing," Cahiers de recherche 9801, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  2. 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.
  3. Yacine Ait-Sahalia, 1995. "Nonparametric Pricing of Interest Rate Derivative Securities," NBER Working Papers 5345, National Bureau of Economic Research, Inc.
  4. Hardle, W., 1992. "Applied Nonparametric Methods," Papers 9206, Tilburg - Center for Economic Research.
  5. 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.
  6. Oliver LINTON, . "Applied nonparametric methods," Statistic und Oekonometrie 9312, Humboldt Universitaet Berlin.
  7. 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.
  8. 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.
  9. Ghysels, E. & Harvey, A. & Renault, E., 1995. "Stochastic Volatility," Papers 95.400, Toulouse - GREMAQ.
  10. 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.
  11. 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).
  12. repec:fth:inseep:9329 is not listed on IDEAS
  13. 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.
  14. repec:dgr:kubcen:199523 is not listed on IDEAS
  15. Gouriéroux, Christian & Monfort, Alain & Tenreiro, Carlos, 1994. "Kernel m-estimators : non parametric diagnostics for structural models," CEPREMAP Working Papers (Couverture Orange) 9405, CEPREMAP.
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