A New Nonparametric Estimate of the Risk-Neutral Density with Applications to Variance Swaps

Jiang, Liyuan; Zhou, Shuang; Li, Keren; Wang, Fangfang; Yang, Jie

doi:10.3389/fams.2020.611878

Cited by 3 publications

(1 citation statement)

References 20 publications

(37 reference statements)

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“…This approach has continued to enjoy wider acceptance in the recent empirical literature (see, e.g. Zhu et al, 2019;Jiang et al, 2019;Lorenčič, 2016;Kim et al, 2019;Noor et al, 2014). Interpolation procedures have vastly been employed in time series and cross-sectional data sets (Honaker & King, 2010;Lepot et al, 2017;Wongsai et al, 2017), and predominantly in groundwater resource data mappings due to challenges of data limitations associated with empirical analysis in this subject area.…”

Section: Methodsmentioning

confidence: 99%

Enhancing agricultural and industrial productivity through freshwater withdrawals and management: implications for the BRICS countries

Egbo

Ezeaku

Okolo

et al. 2022

Environ Dev Sustain

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This paper analysed the effect of freshwater withdrawals and management on agricultural and industrial sectors productivity in the emerging market economies. The auto-regressive distributed lag model and the panel analyses were employed in our estimations. Our result revealed that Brazil had better water use efficiency in agricultural production with annual withdrawals which contribute significantly and positively to the increase in crop and livestock index. In contrast, annual withdrawals for agriculture were considered to be least efficient in Russia, followed by China and India, although, in South Africa, the result suggested an insignificant positive effect in the incremental index. Furthermore, our analysis revealed that freshwater withdrawals have a significant positive impact on industrial outputs in South Africa. Similarly, water withdrawals were positively related to industrial sector productivity in China and Russia. Brazil and India appear to be the least efficient countries where withdrawals impacted negatively (and significantly for Brazil) on industrial sector outputs. Our panel analyses showed that freshwater withdrawals were positively associated with crop and livestock production index and industrial outputs in the BRICS economies. However, the magnitude of the impacts was only significant for the industrial sector. Moreover, investments and private participation in water and sanitation projects impacted significantly and positively in productivity in both sectors.

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Section: Methodsmentioning

confidence: 99%

Enhancing agricultural and industrial productivity through freshwater withdrawals and management: implications for the BRICS countries

Egbo

Ezeaku

Okolo

et al. 2022

Environ Dev Sustain

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show abstract

ℓ1-constrained implied transition densities

Lim

Lee

2024

Journal of Computational and Applied Mathematics

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Natural Cubic Spline Approximation of Risk-Neutral Density

Zhou,

Jiang,

et al. 2024

IJFS

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The risk-neutral density is a fundamental concept in pricing financial derivatives, risk management, and assessing financial markets’ perceptions over significant political or economic events. In this paper, we propose a new nonparametric method for estimating the risk-neutral density using natural cubic splines (NCS). The estimated density is twice continuously differentiable with linear tails at both ends. Our method targets the logarithm of the underlying asset price, releasing the restriction to the positive domain. We theoretically prove the consistency of our NCS method. We conduct a comprehensive empirical study comparing the proposed NCS method with a piecewise constant method, a uniform quartic B-spline method, and a cubic spline method from the literature using 20 years of S&P 500 index option data. The empirical results show that our NCS method is more robust than the piecewise constant method, which can only produce a discontinuous density, especially for options with maturities longer than six months. Moreover, our NCS method outperforms other historical continuous methods in terms of optimization feasibility and option price estimation.

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A New Nonparametric Estimate of the Risk-Neutral Density with Applications to Variance Swaps

Cited by 3 publications

References 20 publications

Enhancing agricultural and industrial productivity through freshwater withdrawals and management: implications for the BRICS countries

Enhancing agricultural and industrial productivity through freshwater withdrawals and management: implications for the BRICS countries

ℓ1-constrained implied transition densities

Natural Cubic Spline Approximation of Risk-Neutral Density

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