We obtain the maximum entropy distribution for an asset from call and digital option prices. A rigorous mathematical …

Mathematical Finance, 2013) to find the maximum entropy density of an asset price to the relative entropy case. This is applied to …. Finally, we study variance swaps and derive a simple formula relating the fair variance swap rate to entropy. Then we show …

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 …

options using the Monte Carlo method and the measurement of the entropy of information for the price of the underlying asset … is made using the Feynman-Kač theorem. The distribution we use is lognormal. Also, in the paper is measured the entropy … of information of Shannon type. The measurement of the entropy of information of the stock market price of the underlying …

This paper suggests a new method of implementing the principle of maximum entropy to retrieve the risk neutral density … previous studies, the method maximizes the entropy measure subject to values of the risk neutral moments. These moments can be … risk neutral density based on the principle of maximum entropy, the benefits of the method that the paper suggests is the …

relative entropy between risk-neutral distributions obtained from implied volatility data at different dates. We set up a …

The entropy valuation of option (Stutzer, 1996) provides a risk-neutral probability distribution (RND, an equivalent … of generalized entropy pricing models based upon Cressie-Read (CR) family of divergences (nesting KL). The main … classic KL-based entropy pricing model is extended and a unified (entropic) pricing framework is constructed upon a family of …

Entropy pricing applies notions of information theory to derive the theoretical value of options. This paper employs … the maximum entropy formulation of option pricing, given risk-neutral moment constraints computed directly from the … observed prices. First, higher-order moments are used to generate option prices. Then a generalization of Shannon entropy …