Gençay, Ramazan; Gradojevic, Nikola - In: Journal of Empirical Finance 17 (2010) 2, pp. 270-282
We develop a dynamic framework to identify aggregate market fears ahead of a major market crash through the skewness premium of European options. Our methodology is based on measuring the distribution of a skewness premium through a q-Gaussian density and a maximum entropy principle. Our...