Supported by empirical examples, this paper provides a theoretical analysis on the impacts of using a suboptimal information set for the estimation of the empirical pricing kernel and, more in general, for the validity of the fundamental theorems of asset pricing. While inferring the...

The article presents a Bayesian nonparametric approach to model the Pricing Kernel (PK), defined as the present value of the ratio between the risk neutral density, q, and a modified physical density, p*. The risk neutral density is estimated from option data and the modified physical density is...

VaR (Value at Risk) and CVaR (Conditional Value at Risk) are implied by option prices. Their relationships to option prices are derived initially under the pricing measure. It does not require assumptions about the distribution of portfolio returns. The effects of measure change are later...

To ensure that central counterparties (“CCPs”) are safe in all market conditions the European Union (EU) has adopted legislation, commonly known as the European Market Infrastructure Regulation (“EMIR”) that deals with their organisational requirements, including prudential requirements...

Using option market data we derive naturally forward-looking, nonparametric and model-free risk estimates, three desired characteristics hardly obtainable using historical returns. The option-implied measures are only based on the first derivative of the option price with respect to the strike...