Constrained General Regression in Pseudo-Sobolev Spaces with Application to Option Pricing
State 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.
|Date of creation:||Sep 2006|
|Date of revision:|
|Contact details of provider:|| Postal: Spandauer Str. 1,10178 Berlin|
Web page: http://sfb649.wiwi.hu-berlin.de
More information through EDIRC
References listed on IDEAS
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.:
- Wolfgang Härdle & Zdenek Hlavka, 2005.
"Dynamics of State Price Densities,"
SFB 649 Discussion Papers
SFB649DP2005-021, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
- Jackwerth, Jens Carsten, 1999. "Option Implied Risk-Neutral Distributions and Implied Binomial Trees: A Literature Review," MPRA Paper 11634, University Library of Munich, Germany.
- Yatchew, Adonis & Hardle, Wolfgang, 2006. "Nonparametric state price density estimation using constrained least squares and the bootstrap," Journal of Econometrics, Elsevier, vol. 133(2), pages 579-599, August.
- Ait-Sahalia, Yacine & Wang, Yubo & Yared, Francis, 2001. "Do option markets correctly price the probabilities of movement of the underlying asset?," Journal of Econometrics, Elsevier, vol. 102(1), pages 67-110, May.
- Ait-Sahalia, Yacine & Lo, Andrew W., 2000.
"Nonparametric risk management and implied risk aversion,"
Journal of Econometrics,
Elsevier, vol. 94(1-2), pages 9-51.
- Yacine Ait-Sahalia & Andrew W. Lo, 2000. "Nonparametric Risk Management and Implied Risk Aversion," NBER Working Papers 6130, National Bureau of Economic Research, Inc.
- Breeden, Douglas T & Litzenberger, Robert H, 1978. "Prices of State-contingent Claims Implicit in Option Prices," The Journal of Business, University of Chicago Press, vol. 51(4), pages 621-51, October.
When requesting a correction, please mention this item's handle: RePEc:hum:wpaper:sfb649dp2006-069. 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: (RDC-Team)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.