Nonparametric Estimates of Option Prices Using Superhedging

Gianluca Cassese

No 293, Working Papers from University of Milano-Bicocca, Department of Economics

Abstract: We propose a new nonparametric technique to estimate the CALL function based on the superhedging principle. Our approach does not require absence of arbitrage and easily accommodates bid/ask spreads and other market imperfections. We prove some optimal statistical properties of our estimates. As an application we first test the methodology on a simulated sample of option prices and then on the S&P 500 index options.

Keywords: Bid/Ask spreads; Implied risk-neutral measure; Nonparametric regression (search for similar items in EconPapers)
JEL-codes: G12 G13 (search for similar items in EconPapers)
Pages: 36
Date: 2015-02, Revised 2015-02
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http://repec.dems.unimib.it/repec/pdf/mibwpaper293.pdf First version, 2015 (application/pdf)

Related works:
Working Paper: Non Parametric Estimates of Option Prices Using Superhedging (2015)
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