Arbeitspapier
Risk-neutral moment-based estimation of affine option pricing models
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.
- Sprache
-
Englisch
- Erschienen in
-
Series: Bank of Canada Staff Working Paper ; No. 2017-55
- Klassifikation
-
Wirtschaft
Asset Pricing; Trading Volume; Bond Interest Rates
- Thema
-
Asset pricing
Econometric and statistical methods
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Feunou, Bruno
Okou, Cédric
- Ereignis
-
Veröffentlichung
- (wer)
-
Bank of Canada
- (wo)
-
Ottawa
- (wann)
-
2017
- DOI
-
doi:10.34989/swp-2017-55
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:44 MEZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- Feunou, Bruno
- Okou, Cédric
- Bank of Canada
Entstanden
- 2017
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