Econometric specification of the risk neutral valuation model

Authors
Clement, E Gourieroux, C Monfort, A
Citation
E. Clement et al., Econometric specification of the risk neutral valuation model, J ECONOMET, 94(1-2), 2000, pp. 117-143
Citations number
31
Categorie Soggetti
Economics
Journal title
JOURNAL OF ECONOMETRICS
ISSN journal
03044076 → ACNP
Volume
94
Issue
1-2
Year of publication
2000
Pages
117 - 143
Database
ISI
SICI code
0304-4076(200001/02)94:1-2<117:ESOTRN>2.0.ZU;2-5
Abstract
In complete markets the no arbitrage opportunity condition implies determin istic relationships between the prices of derivative assets. These relation ships are incompatible with the available data and with statistical inferen ce. The aim of this paper is to reconcile risk neutral valuation and statis tical inference. For this purpose we justify an approach based on a stochas tic risk-neutral measure. (C) 2000 Elsevier Science S.A. All rights reserve d. JEL classification: G13; C51.