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

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

Publication date: August 2010
ISBN 9781455202157
$18.00

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