TY  - JOUR
T1  - The Development of a Risk-Neutral Density Estimation Method
AU - Bahaludin, Hafizah AU - Abdullah, Mimi Hafizah 
JO  - Journal of Engineering and Applied Sciences
VL  - 11
IS  - 7
SP  - 1633
EP  - 1638
PY  - 2016
DA  - 2001/08/19
SN  - 1816-949x
DO  - jeasci.2016.1633.1638
UR  - https://makhillpublications.co/view-article.php?doi=jeasci.2016.1633.1638
KW  - Options
KW  -risk-neutral density
KW  -extract
KW  -distribution
KW  -prices
AB  - The Risk-Neutral Density (RND) function is the distribution implied by option prices. Broadly, the approaches to extract RND can be classified into four categories; an underlying asset is assumed to follow a stochastic distribution, parametric techniques, semi- parametric techniques and smoothing a volatility function. Smoothing volatility function is a common practice in extracting the RND function. Theoretically, it can be estimated by differentiating the call prices twice with respect to the strike price if the continuous strike prices are available. This study focuses on the development of the risk-neutral density estimation by using the smoothing implied volatility smile method.
ER  -