Supported by empirical examples, this paper provides a theoretical analysis on the impacts of using a suboptimal information set for the estimation of the empirical pricing kernel and, more in general, for the validity of the fundamental theorems of asset pricing. While inferring the...

The Black-Scholes framework implies a constant volatility across term and strike, and a lognormal distribution for underlying asset prices. However, it is known that empirical data violates this assumption. In this report we describe, motivate and apply a model-independent,...