In this paper we propose a maximum entropy estimator for the asymptotic distribution of the hedging error for options … maximising Shannon's entropy subject to a set of moment constraints, which in turn yields the value-at-risk and expected … shortfall of the hedging error. The significance of this approach lies in the fact that the maximum entropy estimator allows us …

saw a rise in suggestions for maximum entropy distributions (e.g. Rockinger and Jondeau, 2002, Park and Bera, 2009 or … ; APARCH ; Entropy density ; Skewness ; Kurtosis …

. -- option implied probability of default ; risk neutral density ; cross entropy …