Ait-Sahalia, Yacine; Duarte, Jefferson - 2021
paper develops a method to constrain the values of the first and second derivatives of nonparametric locally polynomial … prices of options. The option pricing function must be monotonic and convex. Simulations demonstrate that nonparametric …-motivated shape restrictions are imposed. Using S&P500 option prices, we show that unconstrained nonparametric estimators violate the …