The forecasting performance of German stock option densities

Ben Craig, Ernst Glatzer, Joachim G. Keller and Martin Scheicher

No 312, Working Papers (Old Series) from Federal Reserve Bank of Cleveland

Abstract: In this paper the authors estimate risk-neutral densities (RND) for the largest euro-area stock market (the index of which is the German DAX), reporting their statistical properties, and evaluating their forecasting performance. The authors have applied an innovative test procedure to a new, rich, and accurate data set. They have two main results. First, They have recorded strong negative skewness in the densities. Second, they find evidence for a significant difference between the actual density and the risk-neutral density, leading to the conclusion that market participants were surprised by the extent of both the rise and the fall of the DAX.

Keywords: Stock market - Germany; Stock options (search for similar items in EconPapers)
Date: 2003
New Economics Papers: this item is included in nep-eec, nep-ets, nep-fin, nep-fmk and nep-rmg
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Citations: View citations in EconPapers (10)

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Related works:
Working Paper: The Forecasting Performance of German Stock Option Densities (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedcwp:0312

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DOI: 10.26509/frbc-wp-200312

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