Audrino, Francesco; Huitema, Robert; Ludwig, Markus - School of Economics and Political Science, Universität … - 2014
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...