Do option markets correctly price the probabilities of movement of the underlying asset?

DOI10.1016/S0304-4076(00)00091-9zbMath0976.62098OpenAlexW2016195689WikidataQ127740642 ScholiaQ127740642MaRDI QIDQ5939359

Yacine Aït-Sahalia, Yu-Bo Wang, Francis Yared

Publication date: 8 January 2002

Published in: Journal of Econometrics (Search for Journal in Brave)

Full work available at URL: https://doi.org/10.1016/s0304-4076(00)00091-9

zbMATH Keywords

jump riskarbitrage relationshipsdensity comparisonGirasanov's theoremimplied volatility smilePeso problemrisk-neutral densitiesstate-price densities

Mathematics Subject Classification ID

Applications of statistics to economics (62P20) Applications of statistics to actuarial sciences and financial mathematics (62P05) Economic time series analysis (91B84)

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Uses Software

• KernSmooth

Cites Work

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• The Pricing of Options and Corporate Liabilities
• Martingales and arbitrage in multiperiod securities markets
• Nonparametric risk management and implied risk aversion
• Options and Efficiency
• On estimating the diffusion coefficient from discrete observations
• Nonparametric Pricing of Interest Rate Derivative Securities
• Option pricing when underlying stock returns are discontinuous