Estimating Probability Distributions Of Future Asset Prices

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Estimating Probability Distributions of Future Asset Prices

Author : Rupert De Vincent-Humphreys
Publisher :
ISBN 13 :
Total Pages : 39 pages
Book Rating : 4.:/5 (89 download)

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Book Synopsis Estimating Probability Distributions of Future Asset Prices by : Rupert De Vincent-Humphreys

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.

A New Framework to Estimate the Risk-Neutral Probability Density Functions Embedded in Options Prices

Author : Mr.Kevin C. Cheng
Publisher : International Monetary Fund
ISBN 13 : 1455202150
Total Pages : 33 pages
Book Rating : 4.4/5 (552 download)

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Book Synopsis A New Framework to Estimate the Risk-Neutral Probability Density Functions Embedded in Options Prices by : Mr.Kevin C. Cheng

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.

Recovering Probability Distributions from Option Prices

Author : Mark Rubinstein
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (129 download)

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Book Synopsis Recovering Probability Distributions from Option Prices by : Mark Rubinstein

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.

Using Option Prices to Estimate Realignment Probabilities in the European Monetary System

Author : Allan M. Malz
Publisher :
ISBN 13 :
Total Pages : 60 pages
Book Rating : 4.3/5 (512 download)

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Book Synopsis Using Option Prices to Estimate Realignment Probabilities in the European Monetary System by : Allan M. Malz

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:

Recovering the Probability Density Function of Asset Prices Using GARCH as Diffusion Approximations

Author : Fabio Fornari
Publisher :
ISBN 13 :
Total Pages : 52 pages
Book Rating : 4.X/5 (6 download)

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Book Synopsis Recovering the Probability Density Function of Asset Prices Using GARCH as Diffusion Approximations by : Fabio Fornari

Download or read book Recovering the Probability Density Function of Asset Prices Using GARCH as Diffusion Approximations written by Fabio Fornari and published by . This book was released on 2001 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Estimating the Implied Risk Neutral Density for the U.S. Market Portfolio

Author : Stephen Figlewski
Publisher :
ISBN 13 :
Total Pages : 44 pages
Book Rating : 4.:/5 (129 download)

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Book Synopsis Estimating the Implied Risk Neutral Density for the U.S. Market Portfolio by : Stephen Figlewski

Download or read book Estimating the Implied Risk Neutral Density for the U.S. Market Portfolio written by Stephen Figlewski and published by . This book was released on 2008 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: The market's risk neutral probability distribution for the value of an asset on a future date can be extracted from the prices of a set of options that mature on that date, but two key technical problems arise. In order to obtain a full well-behaved density, the option market prices must be smoothed and interpolated, and some way must be found to complete the tails beyond the range spanned by the available options. This paper develops an approach that solves both problems, with a combination of smoothing techniques from the literature modified to take account of the market's bid-ask spread, and a new method of completing the density with tails drawn from a Generalized Extreme Value distribution. We extract twelve years of daily risk neutral densities from Samp;P 500 index options and find that they are quite different from the lognormal densities assumed in the Black-Scholes framework, and that their shapes change in a regular way as the underlying index moves. Our approach is quite general and has the potential to reveal valuable insights about how information and risk preferences are incorporated into prices in many financial markets.

Asset Price Dynamics, Volatility, and Prediction

Author : Stephen J. Taylor
Publisher : Princeton University Press
ISBN 13 : 1400839254
Total Pages : 544 pages
Book Rating : 4.4/5 (8 download)

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Book Synopsis Asset Price Dynamics, Volatility, and Prediction by : Stephen J. Taylor

Download or read book Asset Price Dynamics, Volatility, and Prediction written by Stephen J. Taylor and published by Princeton University Press. This book was released on 2011-02-11 with total page 544 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book shows how current and recent market prices convey information about the probability distributions that govern future prices. Moving beyond purely theoretical models, Stephen Taylor applies methods supported by empirical research of equity and foreign exchange markets to show how daily and more frequent asset prices, and the prices of option contracts, can be used to construct and assess predictions about future prices, their volatility, and their probability distributions. Stephen Taylor provides a comprehensive introduction to the dynamic behavior of asset prices, relying on finance theory and statistical evidence. He uses stochastic processes to define mathematical models for price dynamics, but with less mathematics than in alternative texts. The key topics covered include random walk tests, trading rules, ARCH models, stochastic volatility models, high-frequency datasets, and the information that option prices imply about volatility and distributions. Asset Price Dynamics, Volatility, and Prediction is ideal for students of economics, finance, and mathematics who are studying financial econometrics, and will enable researchers to identify and apply appropriate models and methods. It will likewise be a valuable resource for quantitative analysts, fund managers, risk managers, and investors who seek realistic expectations about future asset prices and the risks to which they are exposed.

Estimating the Implied Risk Neutral Density

Author : Stephen Figlewski
Publisher :
ISBN 13 :
Total Pages : 44 pages
Book Rating : 4.:/5 (129 download)

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Book Synopsis Estimating the Implied Risk Neutral Density by : Stephen Figlewski

Download or read book Estimating the Implied Risk Neutral Density written by Stephen Figlewski and published by . This book was released on 2012 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: The market's risk neutral probability distribution for the value of an asset on a future date can be extracted from the prices of a set of options that mature on that date, but two key technical problems arise. In order to obtain a full well-behaved density, the option market prices must be smoothed and interpolated, and some way must be found to complete the tails beyond the range spanned by the available options. This paper develops an approach that solves both problems, with a combination of smoothing techniques from the literature modified to take account of the market's bid-ask spread, and a new method of completing the density with tails drawn from a Generalized Extreme Value distribution. We extract twelve years of daily risk neutral densities from Samp;P 500 index options and find that they are quite different from the lognormal densities assumed in the Black-Scholes framework, and that their shapes change in a regular way as the underlying index moves. Our approach is quite general and has the potential to reveal valuable insights about how information and risk preferences are incorporated into prices in many financial markets.

Estimating Probability Distributions Implicit in Option Prices

Author : Michael A. Ball
Publisher :
ISBN 13 :
Total Pages : 83 pages
Book Rating : 4.:/5 (487 download)

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Book Synopsis Estimating Probability Distributions Implicit in Option Prices by : Michael A. Ball

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:

A Cookbook with Probability One

Author : Damiano Rossello
Publisher : Springer Nature
ISBN 13 : 3031546881
Total Pages : 401 pages
Book Rating : 4.0/5 (315 download)

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Book Synopsis A Cookbook with Probability One by : Damiano Rossello

Download or read book A Cookbook with Probability One written by Damiano Rossello and published by Springer Nature. This book was released on with total page 401 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Option-Implied Risk-Neutral Distributions and Risk Aversion

Author : Jens Carsten Jackwerth
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (95 download)

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Book Synopsis Option-Implied Risk-Neutral Distributions and Risk Aversion by : Jens Carsten Jackwerth

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:

Contemporary Finance

Author : Allan M. Malz
Publisher : John Wiley & Sons
ISBN 13 : 1394179626
Total Pages : 439 pages
Book Rating : 4.3/5 (941 download)

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Book Synopsis Contemporary Finance by : Allan M. Malz

Download or read book Contemporary Finance written by Allan M. Malz and published by John Wiley & Sons. This book was released on 2024-10-29 with total page 439 pages. Available in PDF, EPUB and Kindle. Book excerpt: A clear new finance textbook that explains essential models and practices, and how the financial world works now Contemporary Financial Markets and Institutions: Tools and Techniques to Manage Risk and Uncertainty is an ideal introduction to finance for professionals and students. It covers the basic finance theory required to understand the contemporary financial world and builds on it to present finance in a detailed yet comprehensible way. It explains markets and institutions, and the central bank and government policies that influence how they operate. The book begins with an overview of basic finance theory, including investments, asset return behavior, derivatives pricing, and credit risk. It discusses topics that have dominated markets in recent decades, such as extreme events, liquidity, currency and debt crises, and radical changes in monetary policy and regulation. The concepts are presented alongside examples, strange market episodes, and data from recent experience. Contemporary Financial Markets and Institutions covers advanced credit topics like securitization in a straightforward, succinct way, without advanced mathematics, but with detailed examples using real market data. It integrates financial and macroeconomic content seamlessly. The book is suitable for use by undergraduate and graduate students, and by practitioners of all backgrounds. Abundant pedagogical resources in the book and online facilitate pedagogy. Learn the basic concepts and models in finance, including investment, asset pricing, uncertainty and risk, monetary policy and the regulatory system Explore recent developments, from the expansion of central banks to the chaos in commercial banking to changes in financial technology, that are dominating markets worldwide Gain knowledge of risk types, models, and measurement methods, and the impact of regulation Prepare yourself for a successful career in finance, or update your existing knowledge base with this comprehensive reference guide Ideal as a sole or supplementary textbook for beginning and advanced finance courses, as well as for practitioners in finance-related fields, this book takes a unique, market-focused approach that will serve readers well in our turbulent and puzzling times.

Risk Finance and Asset Pricing

Author : Charles S. Tapiero
Publisher : John Wiley & Sons
ISBN 13 : 0470892382
Total Pages : 530 pages
Book Rating : 4.4/5 (78 download)

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Book Synopsis Risk Finance and Asset Pricing by : Charles S. Tapiero

Download or read book Risk Finance and Asset Pricing written by Charles S. Tapiero and published by John Wiley & Sons. This book was released on 2010-09-24 with total page 530 pages. Available in PDF, EPUB and Kindle. Book excerpt: A comprehensive guide to financial engineering that stresses real-world applications Financial engineering expert Charles S. Tapiero has his finger on the pulse of shifts coming to financial engineering and its applications. With an eye toward the future, he has crafted a comprehensive and accessible book for practitioners and students of Financial Engineering that emphasizes an intuitive approach to financial and quantitative foundations in financial and risk engineering. The book covers the theory from a practitioner perspective and applies it to a variety of real-world problems. Examines the cornerstone of the explosive growth in markets worldwide Presents important financial engineering techniques to price, hedge, and manage risks in general Author heads the largest financial engineering program in the world Author Charles Tapiero wrote the seminal work Risk and Financial Management.

数据、模型与决策:管理科学基础

Author : 伯特西马斯
Publisher : 中信出版社
ISBN 13 : 9787800734700
Total Pages : 556 pages
Book Rating : 4.7/5 (347 download)

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Book Synopsis 数据、模型与决策:管理科学基础 by : 伯特西马斯

Download or read book 数据、模型与决策:管理科学基础 written by 伯特西马斯 and published by 中信出版社. This book was released on 2002 with total page 556 pages. Available in PDF, EPUB and Kindle. Book excerpt: 本书由中信出版社与汤姆森学习集团合作出版。

IMF Staff Papers, Volume 55, No. 1

Author : International Monetary Fund. Research Dept.
Publisher : International Monetary Fund
ISBN 13 : 1589067223
Total Pages : 220 pages
Book Rating : 4.5/5 (89 download)

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Book Synopsis IMF Staff Papers, Volume 55, No. 1 by : International Monetary Fund. Research Dept.

Download or read book IMF Staff Papers, Volume 55, No. 1 written by International Monetary Fund. Research Dept. and published by International Monetary Fund. This book was released on 2008-06-18 with total page 220 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this issue, a team of economists look at approaches to modeling the use of IMF resources in order to gauge whether the recent decline in credit outstanding is a temporary or permanent phenomenon. Era Dabla-Norris and Gabriela Inchauste examine what drives the growth of firms, with a focus on informality and regulations. Evan Tanner and Issouf Samake use a vector autoregression approach to examine the probabilistic sustainability of public debt in Brazil. Mexico, and Turkey. And Rachel Glennerster and Yongseok Shin ask whether transparency pays?that is, does the frequency and accuracy of macroeconomic information released to the public lead to lower borrowing costs in sovereign debt markets?

Estimating the Value of Subsidies for Federal Loans and Loan Guarantees

Author : Deborah Lucas
Publisher :
ISBN 13 :
Total Pages : 40 pages
Book Rating : 4.:/5 (327 download)

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Book Synopsis Estimating the Value of Subsidies for Federal Loans and Loan Guarantees by : Deborah Lucas

Download or read book Estimating the Value of Subsidies for Federal Loans and Loan Guarantees written by Deborah Lucas and published by . This book was released on 2004 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt:

A Companion to Economic Forecasting

Author : Michael P. Clements
Publisher : John Wiley & Sons
ISBN 13 : 140517191X
Total Pages : 616 pages
Book Rating : 4.4/5 (51 download)

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Book Synopsis A Companion to Economic Forecasting by : Michael P. Clements

Download or read book A Companion to Economic Forecasting written by Michael P. Clements and published by John Wiley & Sons. This book was released on 2008-04-15 with total page 616 pages. Available in PDF, EPUB and Kindle. Book excerpt: A Companion to Economic Forecasting provides an accessible and comprehensive account of recent developments in economic forecasting. Each of the chapters has been specially written by an expert in the field, bringing together in a single volume a range of contrasting approaches and views. Uniquely surveying forecasting in a single volume, the Companion provides a comprehensive account of the leading approaches and modeling strategies that are routinely employed.