ESTIMATION OF RISK NEUTRAL MEASURE FOR POLISH STOCK MARKET
Journal Title: e-Finanse - Year 2014, Vol 10, Issue 2
Abstract
In the paper we present the application of risk neutral measure estimation in the analysis of the index WIG20 from Polish stock market. The risk neutral measure is calculated from the process of the options on that index. We assume that risk neutral measure is the mixture of lognormal distributions. The parameters of the distributions are estimated by minimizing the sum of squares of pricing errors. Obtained results are then compared with the model based on a single lognormal distribution. As an example we consider changes in risk neutral distribution at the beginning of March 2014, after the outbreak of political crisis in the Crimea.
Authors and Affiliations
Paweł Kliber
Keywords
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