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Finance Seminar: Peter Carr, Morgan Stanley

Thursday, October 9, 2014
11:00am to 12:00pm
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Dabney Hall 110 (Treasure Room)
Can Investor Beliefs be Extracted from Option Prices?
Peter Carr, Global Head of Market Modeling, Morgan Stanley,

It is well known that option prices can be used to infer so called risk-neutral probabilities.  These risk neutral probabilities differ from investor beliefs due to distortions caused by risk aversion.  Recently, Professor Steve Ross proposed a  set of sufficient conditions under which one can separately identify beliefs and market risk aversion. In this talk, I will review Ross' recovery theorem and the surrounding theoretical and empirical work.

Papers which I plan to survey:

Finance Seminars at Caltech are funded through the generous support of the Linde Institute and Stephen A. Ross.

For more information, please contact Sabrina De Jaegher by phone at Ext. 4228.