Consistent Estimation of Pricing Kernels from Noisy Price Data

Preprint OPEN
Vladislav Kargin;
  • Subject: Mathematics - Statistics Theory | 62G08, 45Q05, 65J22 | epsilon-entropy, non-parametric estimation, pricing kernel, inverse problems | Mathematics - Numerical Analysis | Quantitative Finance - Statistical Finance
    • jel: jel:G12 | jel:C14 | jel:G13
    acm: TheoryofComputation_GENERAL
    arxiv: Computer Science::Computer Science and Game Theory

If pricing kernels are assumed non-negative then the inverse problem of finding the pricing kernel is well-posed. The constrained least squares method provides a consistent estimate of the pricing kernel. When the data are limited, a new method is suggested: relaxed max... View more
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