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State Price Density Estimation and Nonparametric Pricing of Basket Options

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DOI: 10.4236/jmf.2015.55038    4,214 Downloads   4,519 Views  


This paper develops a novel method to price basket options by using an application-driven approach to estimating the state price density of the basket or the joint state price density of the asset prices in the basket. In this connection, we also discuss the difference between the application-driven and the traditional statistical approach to density estimation.

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Kuang, Y. and Lai, T. (2015) State Price Density Estimation and Nonparametric Pricing of Basket Options. Journal of Mathematical Finance, 5, 448-456. doi: 10.4236/jmf.2015.55038.


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