momweight: Calculate weights for ...

In Diffform/IMOMBOX: Calculate Bakshi/Kapadia/Madan moments of option implied return distribution

Description

momweight In BKM03, any contract on $R^n=ln(ST/S0)^N$ can be replicated using bond, the underlying, puts and calls. The function MOMWEIGHT(K,S0,N) yields the required weights in the Put and Call options for any strike level X, spot asset price S0 and contract exponent N. BKM03 paper: arumgents in integral of V, W, X eq. (7)-(9) Open question: n=1 gives eq (39)?

Usage

momweight(X, S0, n)

Arguments

X	vector of strikes
S0	stock price
n	power of the option contract Note that, as there only a discrete number of options employed in this approximation, the accuracy of the result will quickly decrease with N.

Value

Vector of N (4) first standardized moments

Diffform/IMOMBOX documentation built on March 22, 2020, 1:18 a.m.