The most important technical limitation affecting dynamic measurements with PET is low signal-to-noise ratio (SNR). Several reports have suggested that wavelet processing of receptor kinetic data in the human brain can improve the SNR of parametric images of binding potential (BP). However, it is difficult to fully assess these reports because objective standards have not been developed to measure the tradeoff between accuracy (e.g. degradation of resolution) and precision. This paper employs a realistic simulation method that includes all major elements affecting image formation. The simulation was used to derive an ensemble of dynamic PET ligand (11C-raclopride) experiments that was subjected to wavelet processing. A method for optimizing wavelet denoising is presented and used to analyze the simulated experiments. Using optimized wavelet denoising, SNR of the four-dimensional PET data increased by about a factor of two and SNR of three-dimensional BP maps increased by about a factor of 1.5. Analysis of the difference between the processed and unprocessed means for the 4D concentration data showed that more than 80% of voxels in the ensemble mean of the wavelet processed data deviated by less than 3%. These results show that a 1.5x increase in SNR can be achieved with little degradation of resolution. This corresponds to injecting about twice the radioactivity, a maneuver that is not possible in human studies without saturating the PET camera and/or exposing the subject to more than permitted radioactivity.