Jackwerth, Jens Carsten (1999): Option Implied RiskNeutral Distributions and Implied Binomial Trees: A Literature Review. Published in: Journal of Derivatives , Vol. 7, No. 2 (1999): pp. 6682.

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Abstract
In this selective literature review, we start by observing that in efficient markets, there is information incorporated in option prices that might help us to design option pricing models. To this end, we review the numerous methods of recovering riskneutral probability distributions from option prices at one particular time to expiration and their applications. Next, we move beyond one time to expiration to the construction of implied binomial trees, which model the stochastic process of the underlying asset. Finally, we describe extensions of implied binomial trees, and other nonparametric methods.
Item Type:  MPRA Paper 

Original Title:  Option Implied RiskNeutral Distributions and Implied Binomial Trees: A Literature Review 
English Title:  Option Implied RiskNeutral Distributions and Implied Binomial Trees: A Literature Review 
Language:  English 
Keywords:  Binomial Trees; RiskNeutral 
Subjects:  D  Microeconomics > D8  Information, Knowledge, and Uncertainty > D81  Criteria for DecisionMaking under Risk and Uncertainty G  Financial Economics > G3  Corporate Finance and Governance > G32  Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill 
Item ID:  11634 
Depositing User:  Jens Jackwerth 
Date Deposited:  20. Nov 2008 01:21 
Last Modified:  13. Feb 2014 17:58 
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URI:  http://mpra.ub.unimuenchen.de/id/eprint/11634 