Can I read Option-Implied Risk-Neutral Distributions and Risk Aversion on EtoBox?

Option-Implied Risk-Neutral Distributions and Risk Aversion by Jens Carsten Jackwerth is a book available to read on EtoBox.

What is Option-Implied Risk-Neutral Distributions and Risk Aversion about?

Analysts are accustomed to using prices for the information they contain. A stock price, for example, can be thought of as an expected value of future cash flows. Each futures price and option price tells the analyst a bit more about the probability distribution under which those expectations should be accepted. These pieces of information provide the probability distribution of the price. In this Research Foundation monograph, Jens Jackwerth explains why for pricing purposes, the analyst uses the risk-neutral distribution and details the pitfalls of applying this distribution immediately for forecasting. Finally, the risk-neutral distributions can be compared with estimated actual distributions to uncover investor risk preferences. Jackwerth warns, however, of an empirical irregularity that is The risk-neutral distribution, the actual distribution, and the implied preferences are incompatible with each other.

Author

Jens Carsten Jackwerth

Publisher

Research Foundation of AIMR (CFA Institute)

Published

2004

Language

EN

ISBN

9780943205663

Subjects

Finance, Business