Building on the method of Ludwig (2015) to construct robust state price density surfaces from snapshots of option prices, we develop a nonparametric estimation strategy for the recovery theorem of Ross (2013). Using options on the S&P 500, we then investigate whether or not recovery yields...

Building on the results of Ludwig (2012), we propose a method to construct robust time-homogeneous Markov chains that capture the risk-neutral transition of state prices from current snapshots of option prices on the S&P 500 index. Using the recovery theorem of Ross (2013), we then derive the...