In this selective literature review, we start by observingthat in efficient markets, there is informationincorporated in option prices that might help us todesign option pricing models. To this end, we reviewthe numerous methods of recovering risk-neutralprobability distributions from option prices at oneparticular time to expiration and their applications.Next, we move beyond one time to expiration to theconstruction of implied binomial trees, which modelthe stochastic process of the underlying asset. Finally,we describe extensions of implied binomial trees, andother non-parametric methods.
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