Risk, Return, and Ross Recovery

@inproceedings{Carr2012RiskRA,
  title={Risk, Return, and Ross Recovery},
  author={Peter Carr and Jiming Yu},
  year={2012}
}
Carr was asked to share his thoughts on the current state of derivatives theory and practice. His response was to write a discussion and extension of one of the most provocative and potentially important new ideas in the field: Ross’s recent paper on extracting both the risk-neutral density and the empirical density from a set of market option prices. This feat has long been regarded as impossible, so demonstrating that it is not is a major achievement. Carr and Yu detail how the proof is done… CONTINUE READING

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