Journal of Applied Mathematics and Decision Sciences
Volume 6 (2002), Issue 1, Pages 1-22
doi:10.1155/S1173912602000019
Nonparametric statistical methods and the pricing of derivative securities
Department of Statistics, London School of Economics and Political Science, Houghton Street, London WC2A 2AE, UK
Copyright © 2002 Rüdiger Kiesel. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
Abstract
In this review paper we summarise several nonparametric methods recently
applied to the pricing of financial options. After a short introduction to martingale-based
option pricing theory, we focus on two possible fields of application for nonparametric
methods: the estimation of risk-neutral probabilities and the estimation of the dynamics
of the underlying instruments in order to construct an internally consistent model.