Option Prices and Model-free Measurement of Implied Herd Behavior in Stock Markets

Daniël Linders, Jan Dhaene and Wim Schoutens
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Wim Schoutens: KU Leuven, Leuven, Belgium

Tinbergen Institute Discussion Papers from Tinbergen Institute

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 di¤erent stock prices at a xed 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 de nition, each index represents a particular aspect of the market sentiment concerning future co-movement of the underlying stock prices.

Keywords: comonotonicity; herd behavior; HIX; index options; market fear; Model-free measures; VIX (search for similar items in EconPapers)
JEL-codes: G13 G14 (search for similar items in EconPapers)
Date: 2015-01-06
New Economics Papers: this item is included in nep-cfn
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Option prices and model-free measurement of implied herd behavior in stock markets (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20150002

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