We propose a new method to estimate the empirical pricing kernel based on option data. We estimate the pricing kernel nonparametrically by using the ratio of the risk-neutral density estimator and the subjective density estimator. The risk-neutral density is approximated by a weighted kernel...

In this paper, we prove a kind of Abelian theorem for a class of stochastic volatility models (X,V) where both the state process X and the volatility process V may have jumps. Our results relate the asymptotic behavior of the characteristic function of XΔ for some Δ0 in a stationary regime to...

SFB 649 Discussion Paper 2006-038 Adaptive Simulation Algorithms for Pricing American and Bermudan Options by Local Analysis of Financial Market Denis Belomestny* Grigori N. Milstein** * Weierstrass Institute for Applied Analysis and Stochastics, Berlin,...

SFB 649 Discussion Paper 2006-043 An Iteration Procedure for Solving Integral Equations Related to Optimal Stopping Problems Denis Belomestny* Pavel V. Gapeev** * Weierstrass Institute for Applied Analysis and Stochastics, Berlin, Germany ** Russian Academy of...

SFB 649 Discussion Paper 2006-051 Regression methods in pricing American and Bermudan options using consumption processes Denis Belomestny* Grigori N. Milstein** Vladimir Spokoiny* * Weierstrass Institute for Applied Analysis and Stochastics, Berlin, Germany...