Recovering risk-neutral probability density functions from options prices using cubic splines and ensuring nonnegativity

Bibliographic Details
Main Author: Monteiro, Ana Margarida
Publication Date: 2008
Other Authors: Tütüncü, Reha H., Vicente, Luís N.
Format: Article
Language: eng
Source: Repositórios Científicos de Acesso Aberto de Portugal (RCAAP)
Download full: https://hdl.handle.net/10316/5476
Summary: We present a new approach to estimate the risk-neutral probability density function (pdf) of the future prices of an underlying asset from the prices of options written on the asset. The estimation is carried out in the space of cubic spline functions, yielding appropriate smoothness. The resulting optimization problem, used to invert the data and determine the corresponding density function, is a convex quadratic or semidefinite programming problem, depending on the formulation. Both of these problems can be efficiently solved by numerical optimization software.
id RCAP_ce6234006af3b324e17ef8029f5f4610
oai_identifier_str oai:estudogeral.uc.pt:10316/5476
network_acronym_str RCAP
network_name_str Repositórios Científicos de Acesso Aberto de Portugal (RCAAP)
repository_id_str https://opendoar.ac.uk/repository/7160
spelling Recovering risk-neutral probability density functions from options prices using cubic splines and ensuring nonnegativityOption pricingRisk-neutral density estimationCubic splinesQuadratic programmingSemidefinite programmingWe present a new approach to estimate the risk-neutral probability density function (pdf) of the future prices of an underlying asset from the prices of options written on the asset. The estimation is carried out in the space of cubic spline functions, yielding appropriate smoothness. The resulting optimization problem, used to invert the data and determine the corresponding density function, is a convex quadratic or semidefinite programming problem, depending on the formulation. Both of these problems can be efficiently solved by numerical optimization software.http://www.sciencedirect.com/science/article/B6VCT-4NC4M8X-2/1/fed44dd574a24dbc1e9cd48bdb8185b02008info:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/articleaplication/PDFhttps://hdl.handle.net/10316/5476https://hdl.handle.net/10316/5476engEuropean Journal of Operational Research. 187:2 (2008) 525-542Monteiro, Ana MargaridaTütüncü, Reha H.Vicente, Luís N.info:eu-repo/semantics/openAccessreponame:Repositórios Científicos de Acesso Aberto de Portugal (RCAAP)instname:FCCN, serviços digitais da FCT – Fundação para a Ciência e a Tecnologiainstacron:RCAAP2021-11-09T10:31:32Zoai:estudogeral.uc.pt:10316/5476Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireinfo@rcaap.ptopendoar:https://opendoar.ac.uk/repository/71602025-05-29T04:58:18.030908Repositórios Científicos de Acesso Aberto de Portugal (RCAAP) - FCCN, serviços digitais da FCT – Fundação para a Ciência e a Tecnologiafalse
dc.title.none.fl_str_mv Recovering risk-neutral probability density functions from options prices using cubic splines and ensuring nonnegativity
title Recovering risk-neutral probability density functions from options prices using cubic splines and ensuring nonnegativity
spellingShingle Recovering risk-neutral probability density functions from options prices using cubic splines and ensuring nonnegativity
Monteiro, Ana Margarida
Option pricing
Risk-neutral density estimation
Cubic splines
Quadratic programming
Semidefinite programming
title_short Recovering risk-neutral probability density functions from options prices using cubic splines and ensuring nonnegativity
title_full Recovering risk-neutral probability density functions from options prices using cubic splines and ensuring nonnegativity
title_fullStr Recovering risk-neutral probability density functions from options prices using cubic splines and ensuring nonnegativity
title_full_unstemmed Recovering risk-neutral probability density functions from options prices using cubic splines and ensuring nonnegativity
title_sort Recovering risk-neutral probability density functions from options prices using cubic splines and ensuring nonnegativity
author Monteiro, Ana Margarida
author_facet Monteiro, Ana Margarida
Tütüncü, Reha H.
Vicente, Luís N.
author_role author
author2 Tütüncü, Reha H.
Vicente, Luís N.
author2_role author
author
dc.contributor.author.fl_str_mv Monteiro, Ana Margarida
Tütüncü, Reha H.
Vicente, Luís N.
dc.subject.por.fl_str_mv Option pricing
Risk-neutral density estimation
Cubic splines
Quadratic programming
Semidefinite programming
topic Option pricing
Risk-neutral density estimation
Cubic splines
Quadratic programming
Semidefinite programming
description We present a new approach to estimate the risk-neutral probability density function (pdf) of the future prices of an underlying asset from the prices of options written on the asset. The estimation is carried out in the space of cubic spline functions, yielding appropriate smoothness. The resulting optimization problem, used to invert the data and determine the corresponding density function, is a convex quadratic or semidefinite programming problem, depending on the formulation. Both of these problems can be efficiently solved by numerical optimization software.
publishDate 2008
dc.date.none.fl_str_mv 2008
dc.type.status.fl_str_mv info:eu-repo/semantics/publishedVersion
dc.type.driver.fl_str_mv info:eu-repo/semantics/article
format article
status_str publishedVersion
dc.identifier.uri.fl_str_mv https://hdl.handle.net/10316/5476
https://hdl.handle.net/10316/5476
url https://hdl.handle.net/10316/5476
dc.language.iso.fl_str_mv eng
language eng
dc.relation.none.fl_str_mv European Journal of Operational Research. 187:2 (2008) 525-542
dc.rights.driver.fl_str_mv info:eu-repo/semantics/openAccess
eu_rights_str_mv openAccess
dc.format.none.fl_str_mv aplication/PDF
dc.source.none.fl_str_mv reponame:Repositórios Científicos de Acesso Aberto de Portugal (RCAAP)
instname:FCCN, serviços digitais da FCT – Fundação para a Ciência e a Tecnologia
instacron:RCAAP
instname_str FCCN, serviços digitais da FCT – Fundação para a Ciência e a Tecnologia
instacron_str RCAAP
institution RCAAP
reponame_str Repositórios Científicos de Acesso Aberto de Portugal (RCAAP)
collection Repositórios Científicos de Acesso Aberto de Portugal (RCAAP)
repository.name.fl_str_mv Repositórios Científicos de Acesso Aberto de Portugal (RCAAP) - FCCN, serviços digitais da FCT – Fundação para a Ciência e a Tecnologia
repository.mail.fl_str_mv info@rcaap.pt
_version_ 1833602210551824385

Similar Items