Statistical theory has been relatively absent in the exercise of estimating parameters of an option pricing model from cross-sectional data at a fixed point of calendar time. The cross-sectional data typically consists of prices for options at various strikes and maturities at market close. The problem has been the formulation of an error model consistent with no arbitrage conditions satisfied …

Traditionally, the effectiveness of medical treatments is attributed to specific elements, such as drugs or surgical procedures. However, many other factors can significantly effect the outcome. Drugs with nationally advertised names can work better than the same drug without the name. Inert drugs (placebos, dummies) often have dramatic effects on some patients and effects can vary greatly amon…