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Author : Jordan B. Zimbelman
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (14 download)
Download or read book The Tails of Option-Implied Probability Distributions written by Jordan B. Zimbelman and published by . This book was released on 2019 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Daniel Giamouridis
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (595 download)
Download or read book Implied Probability Distributions written by Daniel Giamouridis and published by . This book was released on 2001 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
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 : Jens Carsten Jackwerth
Publisher :
ISBN 13 :
Total Pages : 23 pages
Book Rating : 4.:/5 (342 download)
Download or read book Implied Probability Distributions written by Jens Carsten Jackwerth and published by . This book was released on 1995 with total page 23 pages. Available in PDF, EPUB and Kindle. Book excerpt:
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 : Mark Rubinstein
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (129 download)
Download or read book Implied Probability Distributions 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: An earlier article, quot;Implied Binomial Trees,quot; introduced a theoretical model for implying the stochastic process of an underlying asset price from the prices of associated options. This sequel provides details concerning application of the model to the full record of Samp;P 500 index options transactions from April 2, 1986 through December 31, 1993. Most prominently, it introduces a revised optimization technique for estimating expiration-date risk-neutral probability distributions which is probably theoretically superior and definitely orders of magnitude faster than the approaches outlined in the antecedent paper. This method maximizes the smoothness of the distribution while at the same time insuring that multimodalities are not unrealistically strong. With the exception of the lower left-hand tail of the distribution, alternative optimization specifications typically produce approximately the same implied distributions. Considerable care is taken to specify such parameters as interest rates, dividends, and synchronous index levels, as well as to filter for general arbitrage violations resulting implied probability distributions exhibit changes in skewness as time-to-expiration approaches which are consistent and to use time aggregation to correct for unrealistic persistent jaggedness of implied volatility smiles. The with theoretical predictions. While time patterns of skewness and kurtosis exhibit a discontinuity across the divide of the 1987 market crash, they remain remarkably stable on either side of the divide. Moreover, since the crash, the risk-neutral probability of a four standard deviation decline in the Samp;P index (-46% over a year) is 100 times more likely than would appear to be the case under the assumption of lognormality.
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 : 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 : Damien P.G. Lynch
Publisher :
ISBN 13 :
Total Pages : 57 pages
Book Rating : 4.:/5 (129 download)
Download or read book Summary Statistics of Implied Probability Density Functions written by Damien P.G. Lynch and published by . This book was released on 2002 with total page 57 pages. Available in PDF, EPUB and Kindle. Book excerpt: The statistics that summarise the probability distributions implied from option prices can be used to assess market expectations about future uncertainty, asymmetry and the probability of extreme movements in asset prices. This paper considers implied pdfs with a constant horizon of three months for Samp;P 500, FTSE 100, eurodollar and short-sterling. A time series analysis of the summary statistics provides some stylised facts about the behaviour of different elements of market expectations, their historical distribution and the relationships between them. The distributions of these measures provide information on past revisions to market expectations including the relative likelihood of upward rather than downward revisions and the extent to which these revisions were large. The similarity and relative stability of alternative measures for each element of market expectations is assessed to select a subset of summary statistics that can sufficiently reflect the information contained in the implied pdfs. Relationships between implied pdf summary statistics and movements in underlying assets are considered. Cross asset and cross country comparisons between the summary statistics series are also useful in revealing relations and/or associations between market participants' expectations about equity price and interest rate movements. Finally the information content of the implied pdfs for future macroeconomic and financial variables is assessed.
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 : Damien P.G. Lynch
Publisher :
ISBN 13 :
Total Pages : 61 pages
Book Rating : 4.:/5 (129 download)
Download or read book Summary Statistics of Implied Probability Density Functions and Their Properties written by Damien P.G. Lynch and published by . This book was released on 2002 with total page 61 pages. Available in PDF, EPUB and Kindle. Book excerpt: The statistics that summarise the probability distributions implied from option prices can be used to assess market expectations about future uncertainty, asymmetry and the probability of extreme movements in asset prices. This paper considers implied pdfs with a constant horizon of three months for Samp;P 500, FTSE 100, eurodollar and short-sterling. A time series analysis of the summary statistics provides some stylised facts about the behaviour of different elements of market expectations, their historical distribution and the relationships between them. The distributions of these measures provide information on past revisions to market expectations including the relative likelihood of upward rather than downward revisions and the extent to which these revisions were large. The similarity and relative stability of alternative measures for each element of market expectations is assessed to select a subset of summary statistics that can sufficiently reflect the information contained in the implied pdfs. Relationships between implied pdf summary statistics and movements in underlying assets are considered. Cross asset and cross country comparisons between the summary statistics series are also useful in revealing relations and/or associations between market participants' expectations about equity price and interest rate movements. Finally the information content of the implied pdfs for future macroeconomic and financial variables is assessed.
Author : Robert R. Bliss
Publisher :
ISBN 13 :
Total Pages : 68 pages
Book Rating : 4.3/5 ( download)
Download or read book Testing the Stability of Implied Probability Density Functions written by Robert R. Bliss and published by . This book was released on 2000 with total page 68 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Damien Lynch
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (778 download)
Download or read book Summary Statistics of Option-implied Probability Density Functions and Their Properties written by Damien Lynch and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Warren Deats
Publisher :
ISBN 13 :
Total Pages : 210 pages
Book Rating : 4.:/5 (87 download)
Download or read book Deriving Trading Strategies from Option-implied Risk Neutral Probability Distributions written by Warren Deats and published by . This book was released on 2000 with total page 210 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 : Felix Polyakov
Publisher :
ISBN 13 :
Total Pages : 11 pages
Book Rating : 4.:/5 (13 download)
Download or read book Representation of Probability Distributions With Implied Volatility and Biological Rationale written by Felix Polyakov and published by . This book was released on 2018 with total page 11 pages. Available in PDF, EPUB and Kindle. Book excerpt: Economic and financial theories and practice essentially deal with uncertain future. Humans encounter uncertainty in different kinds of activity, from sensory-motor control to dynamics in financial markets, what has been subject of extensive studies. Representation of uncertainty with normal or lognormal distribution is a common feature of many of those studies. For example, proposed Bayessian integration of Gaussian multisensory input in the brain or log-normal distribution of future asset price in renowned Black-Scholes-Merton (BSM) model for pricing contingent claims.Standard deviation of log(future asset price) scaled by square root of time in the BSM model is called implied volatility. Actually, log(future asset price) is not normally distributed and traders account for that to avoid losses. Nevertheless the BSM formula derived under the assumption of constant volatility remains a major uniform framework for pricing options in financial markets. I propose that one of the reasons for such a high popularity of the BSM formula could be its ability to translate uncertainty measured with implied volatility into price in a way that is compatible with human intuition for measuring uncertainty.The present study deals with mathematical relationship between uncertainty and the BSM implied volatility. Examples for a number of common probability distributions are presented. Overall, this work proposes that representation of various probability distributions in terms of the BSM implied volatility profile may be meaningful in both biological and financial worlds. Necessary background from financial mathematics is provided in the text.
Author : Jess Tropp Larsen
Publisher :
ISBN 13 :
Total Pages : 131 pages
Book Rating : 4.:/5 (474 download)
Download or read book Implied Martingale Probability Distributions written by Jess Tropp Larsen and published by . This book was released on 2005 with total page 131 pages. Available in PDF, EPUB and Kindle. Book excerpt:
