Journal article
Post-'87 crash fears in the S&P 500 futures option market
Journal of econometrics, Vol.94(1), pp.181-238
2000
DOI: 10.1016/S0304-4076(99)00021-4
Abstract
Post-crash distributions inferred from S&P 500 future option prices have been strongly negatively skewed. This article examines two alternate explanations: stochastic volatility and jumps. The two option pricing models are nested, and are fitted to S&P 500 futures options data over 1988–1993. The stochastic volatility model requires extreme parameters (e.g., high volatility of volatility) that are implausible given the time series properties of option prices. The stochastic volatility/jump-diffusion model fits option prices better, and generates more plausible volatility process parameters. However, its implicit distributions are inconsistent with the absence of large stock index moves over 1988–93.
Details
- Title: Subtitle
- Post-'87 crash fears in the S&P 500 futures option market
- Creators
- David S. Bates - University of Iowa
- Resource Type
- Journal article
- Publication Details
- Journal of econometrics, Vol.94(1), pp.181-238
- Publisher
- Elsevier B.V
- DOI
- 10.1016/S0304-4076(99)00021-4
- ISSN
- 0304-4076
- eISSN
- 1872-6895
- Language
- English
- Date published
- 2000
- Academic Unit
- Finance
- Record Identifier
- 9984380376902771
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