Cookies?
Library Header Image
LSE Research Online LSE Library Services

Parametric properties of semi-nonparametric distributions, with applications to option valuation

Mencia, Javier, Leon, Angel and Sentana, Enrique (2007) Parametric properties of semi-nonparametric distributions, with applications to option valuation. Discussion paper, 597. Financial Markets Group, London School of Economics and Political Science, London, UK.

Full text not available from this repository.

Abstract

We derive the statistical properties of the SNP densities of Gallant and Nychka (1987). We show that these densities, which are always positive, are more flexible than truncated Gram-Charlier expansions with positivity restrictions. We use the SNP densities for financial derivatives valuation. We relate real and risk-neutral measures, obtain closed-form prices for European options, and analyse the semiparametric properties of our pricing model. In an Nempirical application to S&P500 index options, we compare our model to the standard and Practitioner’s Black-Scholes formulas, truncated expansions, and the Generalised Beta and Variance Gamma models.

Item Type: Monograph (Discussion Paper)
Official URL: http://fmg.lse.ac.uk
Additional Information: © 2007 The Authors
Library of Congress subject classification: H Social Sciences > HB Economic Theory
H Social Sciences > HA Statistics
Journal of Economic Literature Classification System: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods: General > C16 - Specific Distributions
G - Financial Economics > G1 - General Financial Markets > G13 - Contingent Pricing; Futures Pricing
Sets: Research centres and groups > Financial Markets Group (FMG)
Collections > Economists Online
Collections > LSE Financial Markets Group (FMG) Working Papers
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: 597
Date Deposited: 16 Jul 2009 11:31
URL: http://eprints.lse.ac.uk/24496/

Actions (login required)

Record administration - authorised staff only Record administration - authorised staff only