Estimation of real-world market probabilities by the Ross recovery theorem

• المؤلف الرئيسي: Liu, Bingyu
• مؤلفون آخرون: Nicolas Privault
• التنسيق: Final Year Project
• اللغة: English
• منشور في: Nanyang Technological University 2022
• الموضوعات: Science::Mathematics::Applied mathematics::Simulation and modeling
• الوصول للمادة أونلاين: https://hdl.handle.net/10356/156918
• المؤسسة: Nanyang Technological University

Ross (2015) developed a recovery theorem with the aim to recover the physical probability distribution merely based on the option prices and discover the forward-looking content from the recovery. There have been studies that intensively discuss the possible extensions and robustness of this theorem, some of which criticize its practicality. This thesis intends to build an algorithm based on the framework suggested by Jackwerth and Menner (2020) and explores its application on S&P 500 European call options. The results resembles what are presented in Jackwerth and Menner (2020).