Risk-neutral moment-based estimation of affine option pricing models / by Bruno Feunou and Cédric Okou.: FB3-5/2017-55E-PDF
“This paper provides a novel methodology for estimating option pricing models based on risk-neutral moments. We synthesize the distribution extracted from a panel of option prices and exploit linear relationships between risk-neutral cumulants and latent factors within the continuous time affine stochastic volatility framework. We find that fitting the Andersen, Fusari, and Todorov (2015b) option valuation model to risk-neutral moments captures the bulk of the information in option prices. Our estimation strategy is effective, easy to implement, and robust, as it allows for a direct linear filtering of the latent factors and a quasi-maximum likelihood estimation of model parameters. From a practical perspective, employing risk-neutral moments instead of option prices also helps circumvent several sources of numerical errors and substantially lessens the computational burden inherent in working with a large panel of option contracts"--Abstract, p. ii.
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| Title | Risk-neutral moment-based estimation of affine option pricing models / by Bruno Feunou and Cédric Okou. |
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| Publication type | Monograph - View Master Record |
| Language | [English] |
| Format | Digital text |
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| Description | ii, 59 p. : charts (some col.) |
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