OPTION PRICES AND THE PROBABILITY DISTRIBUTION OF EXCHANGE RATES

Allan M. Malz
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Allan M. Malz: Markets Group of the Federal Reserve Bank of New York, USA

Chapter 7 in Currency Options and Exchange Rate Economics, 1998, pp 108-137 from World Scientific Publishing Co. Pte. Ltd.

Abstract: AbstractThe following sections are included:IntroductionOption Prices and the Probability Distribution of Future Asset PricesConstructing Elementary Contingent Claims from Option PricesThe Distributional Hypothesis of the Black–Scholes ModelKurtosis, Skew and Option PricesMethods of Extracting Probability DensitiesImplied Probability Distributions and the Risk PremiumConclusionsAppendix: Proof of Proposition 1References

Date: 1998
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