The Crisis of 1873: Perspectives from Multiple Asset Classes

@article{Mixon2008TheCO,
  title={The Crisis of 1873: Perspectives from Multiple Asset Classes},
  author={Scott Mixon},
  journal={Derivatives eJournal},
  year={2008}
}
  • Scott Mixon
  • Published 1 September 2008
  • Economics
  • Derivatives eJournal
This paper analyzes asset pricing behavior during the period leading up to the Crisis of 1873. Evidence is presented that equities, options, and bonds priced risks consistently, suggesting that investors were actively monitoring the risk of investing and were not caught up in an irrational, speculative mania. Implied probability density functions for stock returns suggest that option markets exhibited growing concern about substantial price declines prior to the crash. Concerns were… 

Banks, Insider Connections, and Industrialization in New England: Evidence from the Panic of 1873

This paper studies the role of bank affiliations in mitigating frictions related to asymmetric information. The analysis focuses on Massachusetts, and tests whether firms with bank directors on their

Model Risk: Lessons from Past Catastrophes

Financial engineers should study past crises and model breakdowns rather than simply extrapolate from recent successes. The first part of this chapter reviews the 2008 disaster in convertible bonds

Option Markets and Implied Volatility: Past Versus Present

Railroad Defaults , Land Grants , and the Panic of 1873

This paper investigates the relationship between railroad bond defaults and nancial outcomes in the National Banking System during the Panic of 1873. Contemporary accounts and anecdotal evidence

A Concise History of International Finance

Ever since the financial crisis of 2008, doubts have been raised about the future of capitalism. In this broad-ranging survey of financial capitalism from antiquity to the present, Larry Neal reveals

For Richer, for Poorer: Bankers&Apos; Liability and Risk-Taking in New England, 1867-1880

We study whether banks are riskier if managers have less liability. We focus on New England between 1867 and 1880 and consider the introduction of marital property laws that limited liability for

Major Recessions in Sweden 1850–2000: from pre-capitalist to modern types of crises

This article uses historical national accounts to compare major recessions in Sweden from 1850 to 2000. A major recession is defined as an event when the Gross Domestic Product (GDP) in one year is

An Index of the Yields of Junk Bonds, 1910-1955

We present a new monthly index of the yields on junk bonds (high risk, high yield bonds) for the period 1910–1955. This index supplements the indexes of government bond yields, and Aaa and Baa

THEORY AND HISTORY OF FINANCIAL CRISES: EXPLAINING THE PANIC OF 1873

This article demonstrates the value of a joint application of the theory and history of financial crises of 1873. It weaves together concepts of financial and banking panic theory with a narrative

When the Invisible Hand Isn’t a Firm Hand: Disciplining Markets That Won’t Discipline Themselves

The housing crisis of the 2000s exposed fissures in the U.S. financial system. These shortcomings allowed the system to become encumbered with excessive risk and ultimately triggered the worst

References

SHOWING 1-10 OF 50 REFERENCES

The Market for Equity Options in the 1870s

The introduction of exchange-traded options in 1973 led to explosive growth in the stock options market, but put and call options on equity securities have existed for more than a century. Prior to

The Crash of ʼ87: Was It Expected? The Evidence from Options Markets

Transactions prices of S&P 500 futures options over 1985-1987 are examined for evidence of expectations prior to October 1987 of an impending stock market crash. First, it is shown that

Volatility Risk Premiums Embedded in Individual Equity Options

The accumulation of trading experience and empirical evidence since the original Black-Scholes (BS) model was developed, have made it increasingly evident that volatility is not a constant parameter,

Valuing the Futures Market Clearinghouse&Apos;S Default Exposure During the 1987 Crash

Futures market clearinghouses are intermediaries that make large volume trading between anonymous parties feasible. During the October 1987 market crash rumors spread that a major clearinghouse might

Financial Markets and Financial Crises

Warnings of the threat of an impending financial crisis are not new, but do we really know what constitutes an actual episode of crisis and how, once begun, it can be prevented from escalating into a

Asymmetric Information and Financial Crises: a Historical Perspective

This paper examines the nature of financial crises from a historical perspective using the new and burgeoning literature on asymmetric information and financial structure. After describing how this

Prices of State-Contingent Claims Implicit in Option Prices

This paper implements the time-state preference model in a multi-period economy, deriving the prices of primitive securities from the prices of call options on aggregate consumption. These prices

The Origins of Banking Panics: Models, Facts, and Bank Regulation

Banking panics are the central event informing and rationalizing government intervention into the banking industry. In the last decade progress has been made in understanding the origins of panics.

Does Net Buying Pressure Affect the Shape of Implied Volatility Functions?

This paper examines the relation between net buying pressure and the shape of the implied volatility function (IVF) for index and individual stock options. We find that changes in implied volatility