The Normal Inverse Gaussian Distribution and the Pricing of Derivatives

摘要：

We propose the class of Normal Inverse Gaussian (NIG) distributions to approximate an unknown risk neutral density. The appeal of the NIG class of distributions is that it is characterized by the first four moments: mean, variance, skewness and kurtosis. These are the moments we care about in many risk management applications. One strength of our approach is that we link the pricing of individual derivatives to the moments of the risk neutral distribution, which has an intuitive appeal in terms of how volatility, skewness and kurtosis of the risk neutral distribution can explain the behavior of derivative prices. We provide numerical and empirical evidence showing appealing features of our approach, notably its superior performance compared to the existing methods.

作者: Anders Eriksson Eric Ghysels Fangfang Wang

作者单位: Diwan Capital Ltd. Department of Economics, University of North Carolina at Chapel Hill and Department of Finance,Kenan Department of Statistics, University of North Carolina at Chapel Hill

会议类型: 国际会议

会议名称: 2009年中国金融国际年会

会议地点: 广州

会议语种:英文

页码: 1-22

在线出版日期: 2009-07-07（万方平台首次上网日期，不代表论文的发表时间）