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Author : Michael A. Ball
Publisher :
ISBN 13 :
Total Pages : 83 pages
Book Rating : 4.:/5 (487 download)
Download or read book Estimating Probability Distributions Implicit in Option Prices written by Michael A. Ball and published by . This book was released on 2001 with total page 83 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Rupert De Vincent-Humphreys
Publisher :
ISBN 13 :
Total Pages : 39 pages
Book Rating : 4.:/5 (89 download)
Download or read book Estimating Probability Distributions of Future Asset Prices written by Rupert De Vincent-Humphreys and published by . This book was released on 2012 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: "The prices of derivatives contracts can be used to estimate 'risk-neutral' probability density functions that give an indication of the weight investors place on different future prices of their underlying assets, were they risk-neutral. In the likely case that investors are risk-averse, this leads to differences between the risk-neutral probability density and the actual distribution of prices. But if this difference displays a systematic pattern over time, it may be exploited to transform the risk-neutral density into a 'real-world' density that better reflect agents' actual expectations. This work offers a methodology for performing this transformation. The resulting real-world densities may better represent market participants' views of future prices, and so offer an enhanced means of quantifying the uncertainty around financial variables. Comparison with their risk-neutral equivalents may also reveal new and useful information as to how attitudes towards risk are affecting pricing."--Abstract.
Author : Mark Rubinstein
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (129 download)
Download or read book Recovering Probability Distributions from Option Prices written by Mark Rubinstein and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper derives underlying asset risk-neutral probability distributions of European options on the Samp;P 500 index. Nonparametric methods are used to choose probabilities which minimize an objective function subject to requiring that the probabilities are consistent with observed option and underlying asset prices. Alternative optimization specifications produce approximately the same implied distributions. A new and fast optimization technique for estimating probability distributions based on maximizing the smoothness of the resulting distribution is proposed. Since the crash, the risk-neutral probability of a three (four) standard deviation decline in the index (about-36% (-46%) over a year) is about 10 (100) times more likely than under the assumption of lognormality.
Author : Jens Carsten Jackwerth
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (95 download)
Download or read book Option-Implied Risk-Neutral Distributions and Risk Aversion written by Jens Carsten Jackwerth and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Allan M. Malz
Publisher :
ISBN 13 :
Total Pages : 60 pages
Book Rating : 4.3/5 (512 download)
Download or read book Using Option Prices to Estimate Realignment Probabilities in the European Monetary System written by Allan M. Malz and published by . This book was released on 1995 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Rui Fan
Publisher :
ISBN 13 :
Total Pages : 180 pages
Book Rating : 4.3/5 (129 download)
Download or read book Deriving Implied Distributions from Commodity Option Prices written by Rui Fan and published by . This book was released on 2001 with total page 180 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : David C. Shimko
Publisher :
ISBN 13 :
Total Pages : 29 pages
Book Rating : 4.:/5 (92 download)
Download or read book Beyond Implied Volatility written by David C. Shimko and published by . This book was released on 1991 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Mr.Kevin C. Cheng
Publisher : International Monetary Fund
ISBN 13 : 1455202150
Total Pages : 33 pages
Book Rating : 4.4/5 (552 download)
Download or read book A New Framework to Estimate the Risk-Neutral Probability Density Functions Embedded in Options Prices written by Mr.Kevin C. Cheng and published by International Monetary Fund. This book was released on 2010-08-01 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: Building on the widely-used double-lognormal approach by Bahra (1997), this paper presents a multi-lognormal approach with restrictions to extract risk-neutral probability density functions (RNPs) for various asset classes. The contributions are twofold: first, on the technical side, the paper proposes useful transformation/restrictions to Bahra’s original formulation for achieving economically sensible outcomes. In addition, the paper compares the statistical properties of the estimated RNPs among major asset classes, including commodities, the S&P 500, the dollar/euro exchange rate, and the US 10-year Treasury Note. Finally, a Monte Carlo study suggests that the multi-lognormal approach outperforms the double-lognormal approach.
Author : Shigenori Shiratsuka
Publisher :
ISBN 13 :
Total Pages : 56 pages
Book Rating : 4.:/5 (318 download)
Download or read book Information Content of Implied Probability Distributions written by Shigenori Shiratsuka and published by . This book was released on 2001 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Lina Cortes
Publisher :
ISBN 13 :
Total Pages : 26 pages
Book Rating : 4.:/5 (13 download)
Download or read book Implicit Probability Distribution for WTI Options written by Lina Cortes and published by . This book was released on 2018 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper contributes to the literature on the estimation of the Risk Neutral Density (RND) function by modeling the prices of options for West Texas Intermediate (WTI) crude oil that were traded in the period between January 2016 and January 2017. For these series we extract the implicit RND in the option prices by applying the traditional Black & Scholes (1973) model and the semi-nonparametric (SNP) model proposed by Backus, Foresi, Li, & Wu (1997). The results obtained show that when the average market price is compared to the average theoretical price, the lognormal specification tends to systematically undervalue the estimation. On the contrary, the SNP option pricing model, which explicitly adjust for negative skewness and excess kurtosis, results in markedly improved accuracy.
Author : Svetlozar T. Rachev
Publisher : Wiley
ISBN 13 : 0471758906
Total Pages : 369 pages
Book Rating : 4.4/5 (717 download)
Download or read book Fat-Tailed and Skewed Asset Return Distributions written by Svetlozar T. Rachev and published by Wiley. This book was released on 2005-09-15 with total page 369 pages. Available in PDF, EPUB and Kindle. Book excerpt: While mainstream financial theories and applications assume that asset returns are normally distributed, overwhelming empirical evidence shows otherwise. Yet many professionals don’t appreciate the highly statistical models that take this empirical evidence into consideration. Fat-Tailed and Skewed Asset Return Distributions examines this dilemma and offers readers a less technical look at how portfolio selection, risk management, and option pricing modeling should and can be undertaken when the assumption of a non-normal distribution for asset returns is violated. Topics covered in this comprehensive book include an extensive discussion of probability distributions, estimating probability distributions, portfolio selection, alternative risk measures, and much more. Fat-Tailed and Skewed Asset Return Distributions provides a bridge between the highly technical theory of statistical distributional analysis, stochastic processes, and econometrics of financial returns and real-world risk management and investments.
Author : Jian Chen
Publisher : Springer
ISBN 13 : 9811074283
Total Pages : 163 pages
Book Rating : 4.8/5 (11 download)
Download or read book General Equilibrium Option Pricing Method: Theoretical and Empirical Study written by Jian Chen and published by Springer. This book was released on 2018-04-10 with total page 163 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book mainly addresses the general equilibrium asset pricing method in two aspects: option pricing and variance risk premium. First, volatility smile and smirk is the famous puzzle in option pricing. Different from no arbitrage method, this book applies the general equilibrium approach in explaining the puzzle. In the presence of jump, investors impose more weights on the jump risk than the volatility risk, and as a result, investors require more jump risk premium which generates a pronounced volatility smirk. Second, based on the general equilibrium framework, this book proposes variance risk premium and empirically tests its predictive power for international stock market returns.
Author : Allan M. Malz
Publisher :
ISBN 13 :
Total Pages : 61 pages
Book Rating : 4.:/5 (129 download)
Download or read book Option-Implied Probability Distributions and Currency Excess Returns written by Allan M. Malz and published by . This book was released on 2006 with total page 61 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper describes a method of extracting the risk-neutral probability distribution of future exchange rates from option prices. In foreign exchange markets interbank option pricing conventions make possible reliable inferences about risk-neutral probability distributions with relatively little data. Moments drawn from risk-neutral exchange rate distribution are used to explore several issues related to the puzzle of excess returns in currency markets. Tests of the international capital asset pricing model using risk-neutral moments as explanatory variables indicate that option-based moments have considerably greater explanatory power for excess returns in currency markets than has been found in earlier work. Tests of several hypotheses generated by the peso problem approach indicate that jump risk measured by the risk-neutral coefficient of skewness can explain only a small part of the forward bias. These tests take into account not only the second, but the third and fourth moments of the exchange rate implied by option prices, and avoid testing a joint hypothesis including a distributional assumption.
Author : Daniel Giamouridis
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (129 download)
Download or read book Asymptotic Distribution Expansions in Option Pricing written by Daniel Giamouridis and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This article extends an option pricing model and studies the properties of implied probability distribution functions (PDFs) recovered from American interest rate futures options. The model relaxes the restricting assumption of lognormally distributed returns accommodating a wide variety of implied PDFs shapes. Non-normal skewness and kurtosis are found to contribute significantly to estimating more precise implied densities. The model achieves good in-sample accuracy, similar to that achieved by alternative approaches. The recovered implied PDFs are, finally, found to be closer to a median PDF estimated using a number of alternative techniques.
Author : Jessica List
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (611 download)
Download or read book Analysis of Option Implied Probability Distributions written by Jessica List and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis empirically analyses implied risk neutral probability distributions of SMI index options. The contribution of this thesis is its data base (SMI index options), the long observation period (1999 - 2008) and its attempt to use the framework of option implied risk neutral probability distributions in the context of trading strategies. The influence of important market variables (such as the risk premium and the term structure of Swiss interest rates) on the estimated RNDs summary statistics is analysed in a regression framework accounting for heteroscedasticity and autocorrelation of the variables under consideration. It turns out that most of the analysed domestic market variables do not have a significant influence on the calculated implied RND's summary statistics and no significant international spillovers are observable. In addition, option implied moments, in particular the volatility of the implied RND, seem to be poor predictors for future moments of the SMI return distribution. Trading strategies based on option implied information are implemented. After accounting for transaction costs, some of these strategies are not only able to outperform a direct investment in the underlying, but systematically outperformed comparable trading strategies based on spot prices.
Author : Theodore Simos
Publisher : CRC Press
ISBN 13 : 1482284200
Total Pages : 1192 pages
Book Rating : 4.4/5 (822 download)
Download or read book International Conference of Computational Methods in Sciences and Engineering (ICCMSE 2004) written by Theodore Simos and published by CRC Press. This book was released on 2019-04-29 with total page 1192 pages. Available in PDF, EPUB and Kindle. Book excerpt: The International Conference of Computational Methods in Sciences and Engineering (ICCMSE) is unique in its kind. It regroups original contributions from all fields of the traditional Sciences, Mathematics, Physics, Chemistry, Biology, Medicine and all branches of Engineering. The aim of the conference is to bring together computational scientists from several disciplines in order to share methods and ideas. More than 370 extended abstracts have been submitted for consideration for presentation in ICCMSE 2004. From these, 289 extended abstracts have been selected after international peer review by at least two independent reviewers.
Author : Azusa Takeyama
Publisher :
ISBN 13 :
Total Pages : 50 pages
Book Rating : 4.:/5 (813 download)
Download or read book A Framework for Extracting the Probability of Default from Stock Option Prices written by Azusa Takeyama and published by . This book was released on 2012 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt:
