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

Daniël Linders (), Jan Dhaene and Wim Schoutens ()
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Daniël Linders: KU Leuven, Faculty of Business and Economics, Department of Accountancy Finance and Insurance (AFI), Naamsestraat 69, 3000 Leuven, Belgium
Wim Schoutens: KU Leuven, Faculty of Sciences, Department of Mathematics, Celstijnenlaan 200B, 3001 Heverlee, Belgium

International Journal of Financial Engineering (IJFE), 2015, vol. 02, issue 02, 1-35

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.

Keywords: Comonotonicity; herd behavior; HIX; index options; market fear; model-free measures; VIX (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (1)

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Working Paper: Option prices and model-free measurement of implied herd behavior in stock markets (2015)
Working Paper: Option Prices and Model-free Measurement of Implied Herd Behavior in Stock Markets (2015)
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DOI: 10.1142/S2424786315500127

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