Resource title

Nonparametric option pricing with no-arbitrage constraints

Resource image

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Resource description

We propose a completely kernel based method of estimating the call price function or the state price density of options. The new estimator of the call price function fulfills the constraints like monotonicity and convexity given in Breeden and Litzenberger (1978) without necessarily estimating the state price density for an underlying asset price from its option prices. It can be shown that the estimator is pointwise consistent and asymptotically normal. In a simulation study we compare the new estimator to the unconstrained kernel estimator and to the estimator given in Aït-Sahalia and Duarte (2003).

Resource author

Melanie Birke, Kay F. Pilz

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/25013

Resource license

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