Empirical pricing kernels obtained from the UK index options market

Xiaoquan Liu, Mark Shackleton, Stephen Taylor and Xinzhong Xu ()

Applied Economics Letters, 2009, vol. 16, issue 10, 989-993

Abstract: Empirical pricing kernels for the UK equity market are derived as the ratio between risk-neutral densities, inferred from FTSE 100 index options, and historical real-world densities, estimated from time series of the index. The kernels thus obtained are almost compatible with a risk averse representative agent, unlike similar estimates for the US market.

Date: 2009
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DOI: 10.1080/13504850701222210

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