11. Engineered Implied Volatility and Implied Risk-Neutral Distributions

  1. Charles S. Tapiero

Published Online: 6 DEC 2011

DOI: 10.1002/9781118268155.ch11

Risk Finance and Asset Pricing: Value, Measurements, and Markets

Risk Finance and Asset Pricing: Value, Measurements, and Markets

How to Cite

Tapiero, C. S. (2010) Engineered Implied Volatility and Implied Risk-Neutral Distributions, in Risk Finance and Asset Pricing: Value, Measurements, and Markets, John Wiley & Sons, Inc., Hoboken, NJ, USA. doi: 10.1002/9781118268155.ch11

Publication History

  1. Published Online: 6 DEC 2011
  2. Published Print: 20 SEP 2010

ISBN Information

Print ISBN: 9780470549469

Online ISBN: 9781118268155

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Keywords:

  • risk-neutral distributions;
  • personal probability distributions;
  • kernel pricing;
  • estimation problems;
  • european central bank

Summary

This chapter contains sections titled:

  • Overview

  • Introduction

  • The Implied Volatility

  • Example: The Implied Volatility in a Lognormal Process

  • The Implied Risk-Neutral Distribution

  • Example: An Implied Binomial Distribution

  • Example: Calculating the Implied Risk-Neutral Probability

  • Implied Distributions: Parametric Models

  • Example: The Generalized Beta of the Second Kind

  • The A-parametric Approach and the Black-Scholes Model

  • Example: The Shimko Technique

  • The Implied Risk Neutral Distribution and Entropy

  • Examples and Applications

  • Risk Attitude, Implied Risk-Neutral Distribution and Entropy

  • Summary

  • Appendix: The Implied Volatility-The Dupire Model