Härdle, Wolfgang (contributor); … - 2008
lognormal distribution with density:
q(ST|St,r,τ,σ) = 1S
T
√2piσ2τ exp
−
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log
parenleftBig
ST
St
parenrightBig ….13), the implied
conditional distribution, the SPDq(ST|St,r,τ), could be estimated at discrete
timeτ = ntriangletby the product …, we obtain the estimated SPD at fixed time to
maturity, and the distribution of local volatility σ(S,τ).
10.1.3 Barle and …