From observed bid and ask prices of European call and put options we estimate the risk neutral density of a stock at some future time t gt; 0. We restrict attention to a class of densities with heavy tails and use a Bayesian formulation in order to study the variation in the distributions...

From observed bid and ask prices of European call and put options we estimate the risk neutral density of a stock at some future time $t0$. We restrict attention to a class of densities with heavy tails and use a Bayesian formulation in order to study the variation in the distributions fitting...