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Contribution Details
| Type | Journal Article |
| Scope | Discipline-based scholarship |
| Title | Crash of '87 - Was it expected?: Aggregate market fears and long-range dependence |
| Organization Unit | |
| Authors |
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| Item Subtype | Original Work |
| Refereed | Yes |
| Status | Published in final form |
| Language |
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| Journal Title | Journal of Empirical Finance |
| Publisher | Elsevier |
| Geographical Reach | international |
| ISSN | 0927-5398 |
| Volume | 17 |
| Number | 2 |
| Page Range | 270 - 282 |
| Date | 2010 |
| Abstract Text | We develop a dynamic framework to identify aggregate market fears ahead of a major market crash through the skewness premium of European options. Our methodology is based on measuring the distribution of a skewness premium through a q-Gaussian density and a maximum entropy principle. Our findings indicate that the October 19th, 1987 crash was predictable from the study of the skewness premium of deepest out-of-the-money options about two months prior to the crash. |
| Digital Object Identifier | 10.1016/j.jempfin.2009.09.006 |
| Other Identification Number | merlin-id:5969 |
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