Option Implied Moments: An Application to Nikkei 225 Futures Options-Reference-Cited by-同舟云学术

Option Implied Moments: An Application to Nikkei 225 Futures Options

Published:2002-09 Issue:03 Volume:05 Page:301-320
ISSN:0219-0915
Container-title:Review of Pacific Basin Financial Markets and Policies
language:en
Short-container-title:Rev. Pac. Basin Finan. Mark. Pol.

Author:

Ang Kian-Ping¹,Rahman Shafiqur²,Tan Kok-Hui³

Affiliation:

1. United Overseas Bank Group, 80 Raffles Place, Singapore 048624, Singapore

2. School of Business Administration, Portland State University, P. O. Box 751 Portland, OR 97201-0751, USA

3. Division of Banking and Finance, Nanyang Business School, Nanyang Technological University, Nanyang Avenue, Singapore 639798, Singapore

Abstract

This paper proposes an integrated process to recover the moments of the risk-neutral distribution using a Gram-Charlier expansion series and Rubinstein's implied binomial tree approach. The advantage of using the implied tree approach is that it accounts for the possibility of early exercise of American options. We apply the method to American-style options on Nikkei 225 futures. We then demonstrate how to use the implied moments for trading options.

Publisher

World Scientific Pub Co Pte Lt

Subject

Economics and Econometrics,Finance

Link

https://www.worldscientific.com/doi/pdf/10.1142/S0219091502000821

Reference10 articles.

1. The Pricing of Options and Corporate Liabilities

2. Implied exchange rate distributions: evidence from OTC option markets

3. SKEWNESS AND KURTOSIS IN S&P 500 INDEX RETURNS IMPLIED BY OPTION PRICES

4. Option-Implied Risk-Neutral Distributions and Implied Binomial Trees

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