Testing the Stability of Implied Probability Density Functions

By Rob Bliss, Nikolaos Panigirtzoglou. 2002

339 citations recorded by the source corpus.

Subfields: Finance

View Paper: https://www.semanticscholar.org/paper/19b1ecab373449c64c0befaa333092930af0f691

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Citations in the corpus

Extracting Model-Free Volatility from Option Prices: An Examination of the VIX Index (2007, background): “, Bahra [1997], Jackwerth [1999], Bliss and Panigirtzoglou [2000], Bondarenko [2000], and Anagnou et al.”
The Generalized Extreme Value (GEV) Distribution, Implied Tail Index and Option Pricing (2011, neutral): “Even though the three-month LIBOR market does not provide a maturity-matched interest rate, it has the advantages of liquidity and of approximating the actual market borrowing and lending rates faced by option market participants (Bliss and Panigirtzoglou [2004]).”
Estimating option implied risk‐neutral densities using spline and hypergeometric functions (2007, positive): “The construction of the SML method proposed by Bliss and Panigirtzoglou (2002) requires that the implied volatility smile be smoothed in delta space.”
Why does Implied Risk Aversion Smile (2007, neutral): “Although the smile e ect in option implied volatility has received considerable attention, very few papers have sought to investigate the reasons for the implied risk aversion smile.”
Arbitrage-free smoothing of the implied volatility surface (2009, methodology): “The set-up we used is borrowed from Bliss and Panigirtzoglou (2002) developed for testing the stability of state price densities.”
Using Markets to Inform Policy: The Case of the Iraq War (2009, neutral): “Bliss and Panigirtzoglou (2002) compare the smoothed volatility method exemplified by Aït-Sahalia and Lo (1998) with other methods for estimating option pricing functions, finding that it more robust to perturbations in option prices.”
The Finite Moment Log Stable Process and Option Pricing (2003, neutral): “Bliss and Panigirtzoglou (2000) provide a detailed discussion on the sources of errors and their implications for the weights.”
Closed-form transformations from risk-neutral to real-world distributions (2007, neutral): “…Kelly (1996)], non-parametric estimates [Ait-Sahalia and Lo (1998)], multi-parameter discrete distributions [Jackwerth and Rubinstein (1996)] and densities implied by smile functions, defined by either polynomials [Shimko (1993), Malz (1997)] or spline functions [Bliss and Panigirtzoglou (2002a)].”
A Simple and Reliable Way to Compute Option-Based Risk-Neutral Distributions (2014, methodology): “Bliss and Panigirtzoglou (2002) and (2004) implement flat-line extrapolation of a natural spline by introducing additional synthetic data points with implied volatilities equal to those observed for the highest and lowest exercise prices and with exercise prices outside that range.”
Using Copulas to Construct Bivariate Foreign Exchange Distributions with an Application to the Sterling Exchange Rate Index (2005, neutral): “The advantages and disadvantages of parametric and smile-interpolation approaches are discussed in Bliss and Panigirtzoglou (2002).”
Estimation of Risk-Neutral Densities Using Positive Convolution Approximation (2003, neutral): “The method is used in applications by Leahy and Thomas (1996), Campa et al. (1998), and many others.”
Arbitrage-free estimation of the risk-neutral density from the implied volatility smile (2002, methodology): “In contrast to our method, such a situation is difficult to handle using the Bliss and Panigirtzoglou (2002) method.”
Modelling the Implied Probability of Stock Market Movements (2003, neutral): “As Bliss and Panigirtzoglou (2002) discuss, the RND can be obtained by means of five methods: Specification of the stochastic process, implied trees, finite differences, 8 See Hull (2000).”