Estimating Probability Weighting Functions through Option Pricing Bounds
提出一种新方法，利用期权定价的随机占优界限来估计投资者的概率权重函数，发现投资者主观上采用反S形权重函数，对极端收益赋予更高权重，且对极低收益的权重高于极高收益。
Abstract This paper proposes a novel approach to estimating the probability weighting function (PWF) of investors in the option market. We match observed option prices to the option pricing bounds under stochastic dominance rules. Using 1-month S&P 500 index option data, we find that investors could subjectively employ an inverse S-shaped probability weighting function, which increases the weights on extreme returns and asymmetrically assigns greater weights to extremely low returns than to extremely high returns. Our findings suggest that the inverse S-shaped nature of the PWFs is robust across various estimation specifications, such as adopting an alternative methodology to construct the return distribution, and employing option data with different times to maturity.