Risk-Neutral vs. Physical Return Densities
A special issue of Risks (ISSN 2227-9091).
Deadline for manuscript submissions: closed (30 April 2019) | Viewed by 288
Special Issue Editor
Interests: Quantitative finance; esp. asset allocation; portfolio management; pension finance; derivatives pricing and financial engineering; empirical research in financial markets; scenario generation and stochastic optimization
Special Issue Information
Dear Colleagues,
Various techniques have been proposed in the literature to extract risk-neutral return densities from derivatives prices. However, for many applications outside of asset pricing, such as forecasting, portfolio management, or risk management, it is the physical (real-world) density that is primarily of interest. Except for quite restrictive assumptions, little is known in general about the relation between physical (real-world) and risk-neutral asset return densities. Stephen Ross' Recovery Theorem has reignited and further spurred interest in this field, but despite its theoretical appeal, the practical implementation of Ross’ results has proven to be difficult. In sum, there are many open questions in this field that are yet to be investigated.
For this Special Issue, we invite contributions dealing with the relation between risk-neutral and physical (real-world) asset return densities, either from a theoretical or from an empirical point of view.
Prof. Dr. Michael Hanke
Guest Editor
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Keywords
- risk-neutral return densities
- physical return densities
- Ross Recovery Theorem
- information extraction from asset prices
- implied risk-neutral densities
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