Ana M. Monteiro

Dynamic Evolution for Risk-Neutral Densities

  • Ana M. Monteiro
  • Reha H. Tütüncü
  • Luis Nunes Vicente
    • Categories Finance and Economics, Quadratic Programming, Semi-definite Programming Tags , , , ,

    Option price data is often used to infer risk-neutral densities for future prices of an underlying asset. Given the prices of a set of options on the same underlying asset with different strikes and maturities, we propose a nonparametric approach for estimating the evolution of the risk-neutral density in time. Our method uses bicubic splines … Read more

    Recovering Risk-Neutral Probability Density Functions from Options Prices using Cubic Splines

  • Ana M. Monteiro
  • Reha H. Tütüncü
  • Luis Nunes Vicente
    • Categories Finance and Economics, Quadratic Programming, Semi-definite Programming Tags , , , ,

    We present a new approach to estimate the risk-neutral probability density function (pdf) of the future prices of an underlying asset from the prices of options written on the asset. The estimation is carried out in the space of cubic spline functions, yielding appropriate smoothness. The resulting optimization problem, used to invert the data and … Read more