Consistent Estimation of Pricing Kernels from Noisy Price Data

Vladislav Kargin ()

Finance from EconWPA

Abstract: If pricing kernels are assumed non-negative then the inverse problem of finding the pricing kernel is well-posed. The constrained least squares method provides a consistent estimate of the pricing kernel. When the data are limited, a new method is suggested: relaxed maximization of the relative entropy. This estimator is also consistent.

Keywords: epsilon-entropy; non-parametric estimation; pricing kernel; inverse problems (search for similar items in EconPapers)
JEL-codes: G12 G13 C14 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm and nep-fmk
Date: 2003-11-03
Note: Type of Document - pdf; prepared on Win2000; pages: 13
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpfi:0311001

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