The Forecasting Performance of German Stock Option Densities

Joachim Keller, Ernst Glatzer, Ben Craig and Martin Scheicher

No 2003,17, Discussion Paper Series 1: Economic Studies from Deutsche Bundesbank

Abstract: In this paper we will be estimating 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. We have applied an innovative test procedure to a new, rich, and accurate data set. We have two main results. First, we have recorded strong negative skewness in the densities. Second, we find evidence for significant differences 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: option prices; risk-neutral density; density evaluation; overlapping data (search for similar items in EconPapers)
JEL-codes: C22 C52 G13 G15 (search for similar items in EconPapers)
Date: 2003
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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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:zbw:bubdp1:4214

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