Resource title

Confidence Intervals for State Price Densities

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Resource description

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.

Resource author

Zdeněk Hlávka

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Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/22249

Resource license

Adapt according to the presented license agreement and reference the original author.