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Title Crash of '87 [electronic resource] : Was It Expected? The Evidence from Options Markets / David S. Bates.
Imprint Ann Arbor, Mich. : Inter-university Consortium for Political and Social Research [distributor], 1999.


 Internet  Electronic Book    AVAILABLE
Series ICPSR ; 1187.
ICPSR (Series) ; 1187.
Note Title from ICPSR DDI metadata of 2004-10-30.
AVAILABLE. This study is freely available to ICPSR member institutions.
Available only to authorized UTEP users.
0 datasets.
Mode of access: Intranet.
National Science Foundation. SES-8921059.
Also available as downloadable files.
United States.
Subject Economic conditions.
Stock market conditions.
Stock market crashes.
Stock markets.
Summary Efforts to explain why stock markets worldwide crashed in October 1987 have been frustrated by the scarcity of major economic developments occurring around that time that could have precipitated the crashes. It is conceivable that the United States stock market crashed because it was expected to crash. To test this hypothesis, transaction prices of Standard & Poor's 500 futures options over the 1985-1987 period were examined for evidence prior to October 1987 of expectations of an impending crash. It was found that out-of-the-money puts became unusually expensive during the year leading up to the crash. A model was therefore derived for pricing American options on jump-diffusion processes with systematic jump risk. The jump-diffusion parameters implicit in option prices indicate that a crash was expected and that implicit distributions were negatively skewed for the October 1986-August 1987 period. Neither approach, however, points to any strong crash fears in the two months prior to the crash.... Cf.:
Other Author Inter-university Consortium for Political and Social Research.