We build on the work in Fackler and King (1990), and propose a more general calibration model for implied risk neutral densities. Our model allows for the joint calibration of a set of densities at different maturities and dates through a Bayesian dynamic Beta Markov Random Field. Our approach allows for possible time dependence between densities with the same maturity, and for dependence across maturities at the same point in time. This approach to the problem encompasses model exibility, parameter parsimony and, more importantly, information pooling across densities.

A Bayesian Beta Markov Random Field Calibration of the Term Structure of Implied Risk Neutral Densities

CASARIN, Roberto;
2014-01-01

Abstract

We build on the work in Fackler and King (1990), and propose a more general calibration model for implied risk neutral densities. Our model allows for the joint calibration of a set of densities at different maturities and dates through a Bayesian dynamic Beta Markov Random Field. Our approach allows for possible time dependence between densities with the same maturity, and for dependence across maturities at the same point in time. This approach to the problem encompasses model exibility, parameter parsimony and, more importantly, information pooling across densities.
2014
A Bayesian Beta Markov Random Field Calibration of the Term Structure of Implied Risk Neutral Densities
File in questo prodotto:
File Dimensione Formato  
DraftAfter2014Augustv2.pdf

non disponibili

Tipologia: Documento in Pre-print
Licenza: Accesso chiuso-personale
Dimensione 488.45 kB
Formato Adobe PDF
488.45 kB Adobe PDF   Visualizza/Apri

I documenti in ARCA sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10278/43302
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus ND
  • ???jsp.display-item.citation.isi??? ND
social impact