Option Implied Risk-Neutral Distributions and Implied Binomial Trees : a Literature Review
| Type of Publication: | Journal article |
| URI (citable link): | http://nbn-resolving.de/urn:nbn:de:bsz:352-opus-52906 |
| Author: | Jackwerth, Jens Carsten |
| Year of publication: | 1999 |
| Published in: | Journal of Derivatives ; 7 (1999), 2. - pp. 66-82. - ISSN 1074-1240 |
| DOI (citable link): | https://dx.doi.org/10.3905/jod.1999.319143 |
| Summary: |
In this selective literature review, we start by observing that in efficient markets, there is information incorporated in option prices that might help us to design option pricing models. To this end, we review the numerous methods of recovering risk-neutral probability distributions from option prices at one particular time to expiration and their applications. Next, we move beyond one time to expiration to the construction of implied binomial trees, which model the stochastic process of the underlying asset. Finally, we describe extensions of implied binomial trees, and other non-parametric methods.
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| Subject (DDC): | 330 Economics |
| Link to License: | Attribution-NonCommercial-NoDerivs 2.0 Generic |
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JACKWERTH, Jens Carsten, 1999. Option Implied Risk-Neutral Distributions and Implied Binomial Trees : a Literature Review. In: Journal of Derivatives. 7(2), pp. 66-82. ISSN 1074-1240. Available under: doi: 10.3905/jod.1999.319143
@article{Jackwerth1999Optio-12210, title={Option Implied Risk-Neutral Distributions and Implied Binomial Trees : a Literature Review}, year={1999}, doi={10.3905/jod.1999.319143}, number={2}, volume={7}, issn={1074-1240}, journal={Journal of Derivatives}, pages={66--82}, author={Jackwerth, Jens Carsten} }
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