LEADER 00000nam  2200277   4500 
001    AAIMR04481 
005    20061218092638.5 
008    061218s2005                        eng d 
020    9780494044810 
035    (UnM)AAIMR04481 
040    UnM|cUnM 
100 1  Sang, Dahai 
245 14 The "volatility smile" of Canadian index options 
300    87 p 
500    Source: Masters Abstracts International, Volume: 44-01, 
       page: 0139 
502    Thesis (M.Sc.)--Concordia University (Canada), 2005 
520    Estimating the representative agent's or the market's 
       degree of risk aversion from securities prices has a long 
       history. However, it is only since this century that 
       scholars have begun using options data to do so. Options 
       provide a particularly promising context for studying risk
       preferences. Embedded in the prices of traded options is 
       rich information set relating to various aspects of the 
       underlying asset. One piece of embedded information is the
       state price density. To the best of my knowledge, the 
       implied risk aversion deriving from state price density or
       the "risk neutral" distribution has not been well studied 
       in Canadian context. In this paper, the author 
       investigates the volatility smile derived from call 
       options on the Canadian S&P/TSX 60 Index, which is one of 
       the most heavily traded index options in the Canadian 
       market. Then from the option pricing function, the author 
       recovers the risk neutral distribution by using the 
       nonparametric approach---the regularization method 
       proposed by Jackwerth and Rubinstein (1996). The final 
       step is to compare the option inferred risk neutral 
       distribution with the estimated actual distribution of 
       index prices based on, for example, the historical price 
       path over the same time interval. The relationship between
       these two distributions depends on the preference 
       (utility) of investors about money, as they grow richer or
       poorer. Knowing both distributions allows us to infer what
       the preferences must be within an economy to be consistent
       with the option price and the historical returns 
590    School code: 0228 
590    DDC 
650  4 Economics, Finance 
690    0508 
710 20 Concordia University (Canada) 
773 0  |tMasters Abstracts International|g44-01 
856 40 |uhttp://pqdd.sinica.edu.tw/twdaoapp/servlet/