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- Title
Estimating probability distributions of future asset prices: empirical transformations from option-implied risk-neutral to real-world density functions.
- Authors
de Vincent-Humphreys, Rupert; Noss, Joseph
- Abstract
The article discusses the efforts of the Bank of England in estimating probability density functions (pdfs) from options prices in order to obtain an indication of the weight investors place on different future prices. It also compares the risk-neutral distribution generated directly from options prices to the actual distribution of prices. It informs that pdfs give an indication of the probabilities investors if they were risk-neutral.
- Subjects
UNITED Kingdom; BANK of England; DISTRIBUTION (Probability theory); INVESTORS; STATISTICAL correlation; DENSITY
- Publication
Bank of England Quarterly Bulletin, 2012, Vol 52, Issue 3, p246
- ISSN
0005-5166
- Publication type
Article