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Options and the Gamma Knife

Martin, Ian (2018) Options and the Gamma Knife. Journal of Portfolio Management. ISSN 0095-4918 (In Press)

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Abstract

I survey work of Steve Ross (1976) and of Douglas Breeden and Robert Litzenberger (1978) that first showed how to use options to synthesize more complex securities. Their results made it possible to infer the risk-neutral measure associated with a traded asset, and underpinned the development of the VIX index. The other main result of Ross (1976), which shows how to infer joint risk-neutral distributions from option prices, has been much less influential. I explain why, and propose an alternative approach to the problem. This paper is dedicated to Steve Ross, and was written for a special issue of the Journal of Portfolio Management in memory of him.

Item Type: Article
Official URL: http://jpm.iijournals.com/
Additional Information: © 2018 Pageant Media Ltd
Subjects: H Social Sciences > HG Finance
Sets: Departments > Finance
Date Deposited: 25 May 2018 14:21
Last Modified: 05 Jun 2018 11:19
URI: http://eprints.lse.ac.uk/id/eprint/88077

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