%0 Journal Article
%A Carr, Peter
%A Yu, Jiming
%T Risk, Return, and Ross Recovery
%D 2012
%R 10.3905/jod.2012.20.1.038
%J The Journal of Derivatives
%P 38-59
%V 20
%N 1
%X Carr was asked to share his thoughts on the current state of derivatives theory and practice. His response was to write a discussion and extension of one of the most provocative and potentially important new ideas in the field: Rossâ€™s recent paper on extracting both the risk-neutral density and the empirical density from a set of market option prices. This feat has long been regarded as impossible, so demonstrating that it is not is a major achievement. Carr and Yu detail how the proof is done and then present an alternative route to the same result, but starting from what may be considered a more tractable assumption that a numeraire portfolio exists.TOPICS: Options, statistical methods
%U https://jod.pm-research.com/content/iijderiv/20/1/38.full.pdf