The Advantages and Disadvantages of Selected Techniques
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For empirical applications one of the techniques reviewed in Chapter 5 must be selected. In taking this decision an important criterion is whether or not different techniques produce similar results for the risk-neutral density. If this is the case, the choice of technique will not be a major problem but otherwise the results of the application will depend heavily on the approach used. Another relevant issue when choosing between the various approaches relates to implementation problems. Depending on the data set for some techniques, problems are often encountered in the convergence of the optimization algorithm.
KeywordsOption Price Strike Price Stochastic Volatility Model Price Error Mixture Approach
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