{"title":"ARM:分析回收法","authors":"E. Linden","doi":"10.3905/jod.2023.1.178","DOIUrl":null,"url":null,"abstract":"The analytic recovery method (ARM) recovers arbitrage-free density functions from a given set of option prices with maximum accuracy and speed. For arbitrage-free option prices, ARM provides extremely fast convergence and arbitrary accuracy. In the presence of noise, the closest arbitrage-free approximation is identified. Option prices and densities, as well as their moments and other parameters, are easy-to-handle analytic functions defined for arbitrary strike prices. ARM reveals inconsistencies between quoted option prices, particularly for longer durations. ARM is essentially based on the no-arbitrage assumptions; it is not related to a specific model. It has been tested for a selection of S&P 500, EuroStoxx 50, and DAX data. Excellent no-arbitrage fit to call and put prices is obtained; extrapolations are in line with the market.","PeriodicalId":34223,"journal":{"name":"Jurnal Derivat","volume":"30 1","pages":"8 - 27"},"PeriodicalIF":0.0000,"publicationDate":"2023-02-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":"{\"title\":\"ARM: The Analytic Recovery Method\",\"authors\":\"E. Linden\",\"doi\":\"10.3905/jod.2023.1.178\",\"DOIUrl\":null,\"url\":null,\"abstract\":\"The analytic recovery method (ARM) recovers arbitrage-free density functions from a given set of option prices with maximum accuracy and speed. For arbitrage-free option prices, ARM provides extremely fast convergence and arbitrary accuracy. In the presence of noise, the closest arbitrage-free approximation is identified. Option prices and densities, as well as their moments and other parameters, are easy-to-handle analytic functions defined for arbitrary strike prices. ARM reveals inconsistencies between quoted option prices, particularly for longer durations. ARM is essentially based on the no-arbitrage assumptions; it is not related to a specific model. It has been tested for a selection of S&P 500, EuroStoxx 50, and DAX data. Excellent no-arbitrage fit to call and put prices is obtained; extrapolations are in line with the market.\",\"PeriodicalId\":34223,\"journal\":{\"name\":\"Jurnal Derivat\",\"volume\":\"30 1\",\"pages\":\"8 - 27\"},\"PeriodicalIF\":0.0000,\"publicationDate\":\"2023-02-28\",\"publicationTypes\":\"Journal Article\",\"fieldsOfStudy\":null,\"isOpenAccess\":false,\"openAccessPdf\":\"\",\"citationCount\":\"0\",\"resultStr\":null,\"platform\":\"Semanticscholar\",\"paperid\":null,\"PeriodicalName\":\"Jurnal Derivat\",\"FirstCategoryId\":\"1085\",\"ListUrlMain\":\"https://doi.org/10.3905/jod.2023.1.178\",\"RegionNum\":0,\"RegionCategory\":null,\"ArticlePicture\":[],\"TitleCN\":null,\"AbstractTextCN\":null,\"PMCID\":null,\"EPubDate\":\"\",\"PubModel\":\"\",\"JCR\":\"\",\"JCRName\":\"\",\"Score\":null,\"Total\":0}","platform":"Semanticscholar","paperid":null,"PeriodicalName":"Jurnal Derivat","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.3905/jod.2023.1.178","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"","JCRName":"","Score":null,"Total":0}
The analytic recovery method (ARM) recovers arbitrage-free density functions from a given set of option prices with maximum accuracy and speed. For arbitrage-free option prices, ARM provides extremely fast convergence and arbitrary accuracy. In the presence of noise, the closest arbitrage-free approximation is identified. Option prices and densities, as well as their moments and other parameters, are easy-to-handle analytic functions defined for arbitrary strike prices. ARM reveals inconsistencies between quoted option prices, particularly for longer durations. ARM is essentially based on the no-arbitrage assumptions; it is not related to a specific model. It has been tested for a selection of S&P 500, EuroStoxx 50, and DAX data. Excellent no-arbitrage fit to call and put prices is obtained; extrapolations are in line with the market.
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