Department of Economics and Business Economics

Analyzing the Risks Embedded in Option Prices with rndfittool

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This paper introduces a new computational tool for the analysis of the risks embedded in a set of prices of European-style options. The software enables the estimation of the risk-neutral density (RND) from the observed option prices by means of orthogonal polynomial expansions. Orthogonal polynomials offer a viable alternative to more standard techniques based on interpolation and estimation of the second-order derivatives of option prices. The app rndfittool is available on
GitHub and its usage is illustrated with examples based on real data.
Original languageEnglish
Article number28
JournalRisks
Volume6
Issue number2
Number of pages15
DOIs
Publication statusPublished - 2018

    Research areas

  • European options, risk-neutral density, MATLAB app

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