Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/22249
Authors: 
Hlávka, Zdeněk
Year of Publication: 
2003
Series/Report no.: 
Discussion papers of interdisciplinary research project 373 2003,34
Abstract: 
The state price density is a second derivative of the discounted European options prices with respect to the strike price. We use Maximum Likelihood method to derive a simple estimator of the curve such that it is decreasing, convex and its second derivative integrates to one. Confidence intervals for this estimator can be constructed using standard Maximum Likelihood theory. The method works well in praxis as illustrated on the DAX option prices data.
Subjects: 
option pricing
state price density estimation
nonlinear least squares
confidence intervals
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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