search query: @indexterm OPTION PRICES / total: 70
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| Author: | Jackwerth, J. Rubinstein, M. |
| Title: | Recovering probability distributions from option prices |
| Journal: | Journal of Finance
1996 : DEC, VOL. 51:5, p. 1611-1632 |
| Index terms: | FINANCE ECONOMICS OPTION PRICES |
| Language: | eng |
| Abstract: | This article derives underlying asset risk-neutral probability distributions of European options on the S&P 500 index. Nonparametric methods are used to choose probabilities that minimize an objective function subject to requiring that the probabilities are consistent with observed option and underlying asset prices. Alternative optimization specifications produce approximately the same implied distributions. A new and fast optimization technique for estimating probability distributions based on maximizing the smoothness of the resulting distribution is proposed. |
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