Nonparametric pricing of multivariate contingent claims

Arbeitspapier

In this paper, I derive and implement a nonparametric, arbitrage-free technique for multivariate contingent claim (MVCC) pricing. Using results from the method of copulas, I show that the multivariate risk-neutral density can be written as a product of marginal risk-neutral densities and a risk-neutral dependence function. I then develop a pricing technique using nonparametrically estimated marginal risk-neutral densities (based on options data) and a nonparametric dependence function (based on historical return data). By using nonparametric estimation, I avoid the pricing biases that result from incorrect parametric assumptions such as lognormality. I apply this technique to estimate the joint risk-neutral density of euro-dollar and yen-dollar returns. I compare the nonparametric risk-neutral density with density based on a lognormal dependence function and nonparametric marginals. The nonparametric euro-yen risk-neutral density has greater volatility, skewness, and kurtosis than the density based on a lognormal dependence function. In a comparison of pricing accuracy for euro-yen futures options, I find that the nonparametric model is superior to the lognormal model.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Staff Report ; No. 162

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Estimation: General ; Information and Market Efficiency; Event Studies; Insider Trading
• Thema: Optionspreistheorie ; Nichtparametrisches Verfahren ; Statistische Verteilung

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Rosenberg, Joshua V.
• Ereignis: Veröffentlichung
• (wer): Federal Reserve Bank of New York
• (wo): New York, NY
• (wann): 2003

Weitere Informationen

• Handle: http://hdl.handle.net/10419/60695
• Letzte Aktualisierung: 10.03.2025, 11:43 MEZ