Generalized Transform Analysis for Asset Pricing and Parameter Estimation

77 Pages Posted: 7 Jan 2021 Last revised: 25 May 2021

See all articles by Yannick Dillschneider

Yannick Dillschneider

University of Amsterdam - Amsterdam School of Economics (ASE)

Date Written: May 25, 2021

Abstract

In this paper, we extend the existing generalized transform analysis in a way that allows us to propose a novel GMM approach for estimating asset pricing models. Our methodology is capable of incorporating a broad class of assets within both reduced-form and structural models, while avoiding the drawbacks of competing approaches. To formulate moment conditions, we derive expressions for moments involving transform-based asset prices. Our theory yields analytically tractable expressions for exact moments and an additionally computationally efficient strategy to obtain approximate moments, whose convergence we establish under standard conditions. Exact and approximate moments induce exact and approximate GMM estimators, respectively, for which we discuss asymptotic properties. Finally, we exemplify our methodology with a worked-out estimation problem involving equity options.

Keywords: standard transforms, generalized transforms, asset pricing, GMM estimation

JEL Classification: C32, C51, C58, G12, G13

Suggested Citation

Dillschneider, Yannick, Generalized Transform Analysis for Asset Pricing and Parameter Estimation (May 25, 2021). Available at SSRN: https://ssrn.com/abstract=3730071 or http://dx.doi.org/10.2139/ssrn.3730071

Yannick Dillschneider (Contact Author)

University of Amsterdam - Amsterdam School of Economics (ASE) ( email )

Roetersstraat 11
Amsterdam, North Holland 1018 WB
Netherlands

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