ExtractingRisk-NeutralDensitiesfromOptionPricesusing.pptVIP

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2016-09-30 发布于天津
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ExtractingRisk-NeutralDensitiesfromOptionPricesusing.ppt

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ExtractingRisk-NeutralDensitiesfromOptionPricesusing.ppt

12.02.98 ? E. Chin C. Pirkner Extracting Risk-Neutral Densities from Option Pricesusing Mixture Binomial Trees Christian Pirkner Andreas S. Weigend Heinz Zimmermann Outline Motivation Butterfly-Spread Implied Binomial Tree 1. Introduction An European equity call option (C) is the right to … buy an underlying security, S for a specified strike price, X at time to expiration, T ? payoff function: max [ST - X, 0] 1. Introduction 1. Introduction 1. Introduction 1. Introduction Instead of building a ... standard binomial tree starting at time t=0 resting on the assumption of normally distributed returns and constant volatility 2. Model … where we optimize for the lowest absolute mean squared error in option prices 2. Model 3. Application 3. Evaluation Analysis 3. Evaluation Analysis 3. Evaluation Analysis 3. Evaluation Analysis 3. Evaluation Analysis 3. Evaluation Analysis 3. Evaluation Analysis 3. Evaluation Analysis Conclusion Learning from option prices ? Extracting market expectations * DMF 99 * Data Mining in Finance, 1999 March 8, 1999 Version 1.0 Introduction Model Application Mixture Binomial Tree Optimization Graph Density Extraction: 1 Day Density Extraction over Time Conclusion Part 1 Part 2 Part 3 ? ü Introduction Application Model - Motivation - ? Goal: What can we learn from market prices of traded options? ? Extract expectations of market participants Use this information for decision making! ? Exotic option pricing, risk measurement and trading Introduction Application Model - … a butterfly-spread - ? Introduction Model X 7 8 9 10 11 12 13 C 3.354 2.459 1.670 1.045 0.604 0.325 0.164 +1.670 -2.095 +0.604 0 0 0 1 2 3 4 0 0 0 0 -2 -4 -6 0 0 0 0 0 1 2 Payoff if ST = ... 7 8 9 10 11 12 13 0 0 0 1 0 0 0 0.184 DC -0.895 -0.789 -0.625 -0.441 -0.279 -0.161 D(DC) 0.106 0.164 0.184 0.162 0.118 Costbsp Buy 1 C(X=9) Sell 2 C(X=10) Buy 1 C(X=11) S=10 Application vj - … risk-neutral probabilities - ? Introduction Model S=10 Application X 7 8 9 10 11 12 1