Use this URL to cite or link to this record in EThOS: http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.576830
Title: Nonlinear conditional risk-neutral density estimation in discrete time with applications to option pricing, risk preference measurement and portfolio choice
Author: Hansen Silva, Erwin Guillermo
Awarding Body: University of Manchester
Current Institution: University of Manchester
Date of Award: 2013
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Abstract:
In this thesis, we study the estimation of the nonlinear conditionalrisk-neutral density function (RND) in discrete time. Specifically, weevaluate the extent to which the estimated nonlinear conditional RNDvaluable insights to answer relevant economic questions regarding to optionpricing, the measurement of invertors' preferences and portfolio choice.We make use of large dataset of options contracts written on the S&P 500index from 1996 to 2011, to estimate the parameters of the conditional RNDfunctions by minimizing the squared option pricing errors delivered by thenonlinear models studied in the thesis.In the first essay, we show that a semi-nonparametric option pricing modelwith GARCH variance outperforms several benchmarks models in-sample andout-of-sample. In the second essay, we show that a simple two-state regimeswitching model in volatility is not able to fully account for the pricingkernel and the risk aversion puzzle; however, it provides a reasonablecharacterisation of the time-series properties of the estimated riskaversion.In the third essay, we evaluate linear stochastic discount factormodels using an out-of-sample financial metric. We find that multifactormodels outperform the CAPM when this metric is used, and that modelsproducing the best fit in-sample are also those exhibiting the bestperformance out-of-sample.
Supervisor: Guidolin, Massimo Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID: uk.bl.ethos.576830  DOI: Not available
Keywords: Risk-neutral density function estimation ; Semi-nonparametric models ; Option pricing ; Portfolio choice
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