Download or read book A Simple and Reliable Way to Compute Option-Based Risk-Neutral Distributions written by Allan M. Malz and published by . This book was released on 2014 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper describes a method for computing risk-neutral density functions based on the option-implied volatility smile. Its aim is to reduce complexity and provide cookbook-style guidance through the estimation process. The technique is robust and avoids violations of option no-arbitrage restrictions that can lead to negative probabilities and other implausible results. I give examples for equities, foreign exchange, and long-term interest rates.