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A New Framework to Estimate the Risk-Neutral Probability Density Functions Embedded in Options Prices

A New Framework to Estimate the Risk-Neutral Probability Density Functions Embedded in Options Prices »

Source: A New Framework to Estimate the Risk-Neutral Probability Density Functions Embedded in Options Prices

Volume/Issue: 2010/181

Series: IMF Working Papers

Author(s): Kevin Cheng

Publisher: INTERNATIONAL MONETARY FUND

Publication Date: 01 August 2010

ISBN: 9781455202157

Keywords: Implied risk-neutral density functions, market expectations, probability, kurtosis, equation, probability density, standard deviation, Estimation,

Building on the widely-used double-lognormal approach by Bahra (1997), this paper presents a multi-lognormal approach with restrictions to extract risk-neutral probability density functions (RNPs) for various asset...

The Option-iPoD

The Option-iPoD »

Source: The Option-iPoD

Volume/Issue: 2008/194

Series: IMF Working Papers

Author(s): Christian Capuano

Publisher: INTERNATIONAL MONETARY FUND

Publication Date: 01 August 2008

ISBN: 9781451870527

Keywords: endogenous default barrier, cross-entropy, option contracts, volatility smile, probability, probability density function, probability density, bond, bonds,

We present a framework to derive the probability of default implied by the price of equity options. The framework does not require any strong statistical assumption, and provide results that are informative on the...

Subordinated Levy Processes and Applications to Crude Oil Options

Subordinated Levy Processes and Applications to Crude Oil Options »

Source: Subordinated Levy Processes and Applications to Crude Oil Options

Volume/Issue: 2005/174

Series: IMF Working Papers

Author(s): Noureddine Krichene

Publisher: INTERNATIONAL MONETARY FUND

Publication Date: 01 September 2005

ISBN: 9781451861938

Keywords: Characteristic functions, Esscher transform, Fourier transform, Inverse problem, Levy processes, Risk-neutral density, Volatility, crude oil, martingale, probability

One approach to oil markets is to treat oil as an asset, besides its role as a commodity. Speculative and nonspeculative activity by investors in the derivatives markets could be responsible for a sizable increase...

Crude Oil Prices

Crude Oil Prices »

Source: Crude Oil Prices : Trends and Forecast

Volume/Issue: 2008/133

Series: IMF Working Papers

Author(s): Noureddine Krichene

Publisher: INTERNATIONAL MONETARY FUND

Publication Date: 01 May 2008

ISBN: 9781451869927

Keywords: Characteristic function, crude oil prices, density forecast, Esscher transform, Fourier transform, inverse problem, normal inverse Gaussian, option prices., oil prices, probability

Following record low interest rates and fast depreciating U.S. dollar, crude oil prices became under rising pressure and seemed boundless. Oil price process parameters changed drastically in 2003M5-2007M10 toward c...

Systemic Real and Financial Risks

Systemic Real and Financial Risks »

Source: Systemic Real and Financial Risks : Measurement, Forecasting, and Stress Testing

Volume/Issue: 2012/58

Series: IMF Working Papers

Author(s): Marcella Lucchetta , and Gianni De Nicolo

Publisher: INTERNATIONAL MONETARY FUND

Publication Date: 01 February 2012

ISBN: 9781463937768

Keywords: Systemic Risks, Dynamic Factor Model, Quantile Auto-regressions, Density Forecasts, forecasting, bank credit, banking, probability, Econometric Modeling, Business Fluctuations

This paper formulates a novel modeling framework that delivers: (a) forecasts of indicators of systemic real risk and systemic financial risk based on density forecasts of indicators of real activity and financial...

Portfolio Credit Risk and Macroeconomic Shocks

Portfolio Credit Risk and Macroeconomic Shocks »

Source: Portfolio Credit Risk and Macroeconomic Shocks : Applications to Stress Testing Under Data-Restricted Environments

Volume/Issue: 2006/283

Series: IMF Working Papers

Author(s): Miguel Segoviano Basurto

Publisher: INTERNATIONAL MONETARY FUND

Publication Date: 01 December 2006

ISBN: 9781451865431

Keywords: Portfolio credit risk measurement, macroeconomic shock measurement, multivariate density estimation, entropy distribution, credit risk, probability, equation, probabilities, Econometric and Statistical Methods: Other, Model Evaluation and Selection

Portfolio credit risk measurement is greatly affected by data constraints, especially when focusing on loans given to unlisted firms. Standard methodologies adopt convenient, but not necessarily properly specified...

A New Framework to Estimate the Risk-Neutral Probability Density Functions Embedded in Options Prices

A New Framework to Estimate the Risk-Neutral Probability Density Functions Embedded in Options Prices »

Volume/Issue: 2010/181

Series: IMF Working Papers

Author(s): Kevin Cheng

Publisher: INTERNATIONAL MONETARY FUND

Publication Date: 01 August 2010

DOI: http://dx.doi.org/10.5089/9781455202157.001

ISBN: 9781455202157

Keywords: Implied risk-neutral density functions, market expectations, probability, kurtosis, equation, probability density, standard deviation, Estimation,

Building on the widely-used double-lognormal approach by Bahra (1997), this paper presents a multi-lognormal approach with restrictions to extract risk-neutral probability density functions (RNPs) for various asset...

The Option-iPoD

The Option-iPoD »

Volume/Issue: 2008/194

Series: IMF Working Papers

Author(s): Christian Capuano

Publisher: INTERNATIONAL MONETARY FUND

Publication Date: 01 August 2008

DOI: http://dx.doi.org/10.5089/9781451870527.001

ISBN: 9781451870527

Keywords: endogenous default barrier, cross-entropy, option contracts, volatility smile, probability, probability density function, probability density, bond, bonds,

We present a framework to derive the probability of default implied by the price of equity options. The framework does not require any strong statistical assumption, and provide results that are informative on the...

Subordinated Levy Processes and Applications to Crude Oil Options

Subordinated Levy Processes and Applications to Crude Oil Options »

Volume/Issue: 2005/174

Series: IMF Working Papers

Author(s): Noureddine Krichene

Publisher: INTERNATIONAL MONETARY FUND

Publication Date: 01 September 2005

DOI: http://dx.doi.org/10.5089/9781451861938.001

ISBN: 9781451861938

Keywords: Characteristic functions, Esscher transform, Fourier transform, Inverse problem, Levy processes, Risk-neutral density, Volatility, crude oil, martingale, probability

One approach to oil markets is to treat oil as an asset, besides its role as a commodity. Speculative and nonspeculative activity by investors in the derivatives markets could be responsible for a sizable increase...

Crude Oil Prices
			: Trends and Forecast

Crude Oil Prices : Trends and Forecast »

Volume/Issue: 2008/133

Series: IMF Working Papers

Author(s): Noureddine Krichene

Publisher: INTERNATIONAL MONETARY FUND

Publication Date: 01 May 2008

DOI: http://dx.doi.org/10.5089/9781451869927.001

ISBN: 9781451869927

Keywords: Characteristic function, crude oil prices, density forecast, Esscher transform, Fourier transform, inverse problem, normal inverse Gaussian, option prices., oil prices, probability

Following record low interest rates and fast depreciating U.S. dollar, crude oil prices became under rising pressure and seemed boundless. Oil price process parameters changed drastically in 2003M5-2007M10 toward c...