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Autor:innen: 
Erscheinungsjahr: 
2008
Schriftenreihe/Nr.: 
Working Paper No. 2007-02
Verlag: 
Rutgers University, Department of Economics, New Brunswick, NJ
Zusammenfassung: 
This paper examines a variety of methods for extracting implied probability distributions from option prices and the underlying. The paper first explores non-parametric procedures for reconstructing densities directly from options market data. I then consider local volatility functions, both through implied volatility trees and volatility interpolation. I then turn to alternative specifications of the stochastic process for the underlying. I estimate a mixture of log normals model, apply it to exchange rate data, and illustrate how to conduct forecast comparisons. I finally turn to the estimation of jump risk by extracting bipower variation.
Schlagwörter: 
Options
implied probability densities
volatility smile
jump risk
bipower variation
JEL: 
G12
G14
F31
Dokumentart: 
Working Paper

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