Journal article
The Crash of '87: Was It Expected? The Evidence from Options Markets
The Journal of finance (New York), Vol.46(3), pp.1009-1044
07/1991
DOI: 10.1111/j.1540-6261.1991.tb03775.x
Abstract
Transactions prices of S&P 500 futures options over 1985-1987 are examined for evidence of expectations prior to October 1987 of an impending stock market crash. First, it is shown that out-of-the-money puts became unusually expensive during the year preceding the crash. Second, a model is derived for pricing American options on jump-diffusion processes with systematic jump risk. The jump-diffusion parameters implicit in options prices indicate that a crash was expected and that implicit distributions were negatively skewed during October 1986 to August 1987. Both approaches indicate no strong crash fears during the 2 months immediately preceding the crash.
Details
- Title: Subtitle
- The Crash of '87: Was It Expected? The Evidence from Options Markets
- Creators
- David S. Bates
- Resource Type
- Journal article
- Publication Details
- The Journal of finance (New York), Vol.46(3), pp.1009-1044
- Publisher
- American Finance Association
- DOI
- 10.1111/j.1540-6261.1991.tb03775.x
- ISSN
- 0022-1082
- eISSN
- 1540-6261
- Language
- English
- Date published
- 07/1991
- Academic Unit
- Finance
- Record Identifier
- 9984380440602771
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