2010-09-09Buch DOI: 10.18452/4273
Parametric estimation of risk neutral density functions
 dc.contributor.author Grith, Maria dc.contributor.author Krätschmer, Volker dc.date.accessioned 2017-06-16T00:12:28Z dc.date.available 2017-06-16T00:12:28Z dc.date.created 2010-10-27 dc.date.issued 2010-09-09 dc.identifier.issn 1860-5664 dc.identifier.uri http://edoc.hu-berlin.de/18452/4925 dc.description.abstract This chapter deals with the estimation of risk neutral distributions for pricing index options resulting from the hypothesis of the risk neutral valuation principle. After justifying this hypothesis, we shall focus on parametric estimation methods for the risk neutral density functions determining the risk neutral distributions. We we shall differentiate between the direct and the indirect way. Following the direct way, parameter vectors are estimated which characterize the distributions from selected statistical families to model the risk neutral distributions. The idea of the indirect approach is to calibrate characteristic parameter vectors for stochastic models of the asset price processes, and then to extract the risk neutral density function via Fourier methods. For every of the reviewed methods the calculation of option prices under hypothetically true risk neutral distributions is a building block. We shall give explicit formula for call and put prices w.r.t. reviewed parametric statistical families used for direct estimation. Additionally, we shall introduce the Fast Fourier Transform method of call option pricing developed in [6]. It is intended to compare the reviewed estimation methods empirically. eng dc.language.iso eng dc.publisher Humboldt-Universität zu Berlin, Wirtschaftswissenschaftliche Fakultät dc.rights.uri http://rightsstatements.org/vocab/InC/1.0/ dc.subject Risk neutral valuation principle eng dc.subject risk neutral distribution eng dc.subject logprice risk neutral distribution eng dc.subject risk neutral density function eng dc.subject Black Scholes formula eng dc.subject Fast Fourier Transform method eng dc.subject log-normal distributions eng dc.subject mixtures of log-normal distributions eng dc.subject generalized gamma distributions eng dc.subject model calibration eng dc.subject Merton’s jump diffusion model eng dc.subject Heston’s volatility model eng dc.subject.ddc 330 Wirtschaft dc.title Parametric estimation of risk neutral density functions dc.type book dc.identifier.urn urn:nbn:de:kobv:11-100176440 dc.identifier.doi http://dx.doi.org/10.18452/4273 local.edoc.container-title Sonderforschungsbereich 649: Ökonomisches Risiko local.edoc.pages 26 local.edoc.type-name Buch local.edoc.container-type series local.edoc.container-type-name Schriftenreihe local.edoc.container-volume 2010 local.edoc.container-issue 45 local.edoc.container-year 2010 local.edoc.container-erstkatid 2195055-6