On extracting information implied in options
Estimation of the implied velocity (IV) and state price density (SPD) by observed price data of European options is discussed. The authors propose to use nonparametric locally quadratic (or locally linear) estimates. The estimates are derived by constrained optimization of the weighted least squares criterion, where the constraints are needed to derive non-negative SPDs. Results of real data analyses are presented.
scientific article; zbMATH DE number 5697308
scientific article