The Recovery Theorem
We can only estimate the distribution of stock returns, but from option prices we observe the distribution of state prices. State prices are the product of risk aversion—the pricing kernel—and the natural probability distribution. The Recovery Theorem enables us to separate these to determine the ma...
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| Format: | Article |
| Language: | en_US |
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American Finance Association/Wiley
2015
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| Online Access: | http://hdl.handle.net/1721.1/99126 https://orcid.org/0000-0001-8894-5217 |