Option prices and model-free measurement of implied herd behavior in stock markets

Daniël Linders, Jan Dhaene, Wim Schoutens

Research output: Contribution to journalArticlepeer-review

Abstract

In this paper, we introduce two classes of indices which can be used to measure the market perception concerning the degree of dependency that exists between a set of random variables, representing different stock prices at a fixed future date. The construction of these measures is based on the theory of comonotonicity. Both types of herd behavior indices are model-free and risk-neutral, derived from available option data. Depending on its particular definition, each index represents a particular aspect of the market sentiment concerning future co-movement of the underlying stock prices.
Original languageEnglish (US)
Pages (from-to)1550012, 35
JournalInt. J. Financ. Eng.
Volume2
Issue number2
DOIs
StatePublished - 2015

Keywords

  • Comonotonicity
  • herd behavior
  • HIX
  • index options
  • market fear
  • model-free measures
  • VIX

Fingerprint

Dive into the research topics of 'Option prices and model-free measurement of implied herd behavior in stock markets'. Together they form a unique fingerprint.

Cite this