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Two-phase phenomenon in linear and non-linear financial instruments

Author

Listed:
  • Kim, Min Jae
  • Lee, Ja Eun
  • Kim, Soo Yong
  • Kim, Kyungsik

Abstract

Two-phase phenomenon in financial markets can be described as a herding model. In our research, linear property products, 713 stocks and KOSPI 200 futures, show an out-of-equilibrium phase. Non-linear property financial instruments, KOSPI 200 option, however, have different characteristics depending on their general usage. Especially, as we classify put option into OTM and ITM, a two-phase graph is not noticed in OTM put option which is generally used for hedging in normal market, yet it is dually recognized in ITM put option which is less attractive financial derivatives because of its higher cost. By considering the relationship with call option, herding behavior is distorted in the option market, because put call parity restricts both call and put option which evolve separately.

Suggested Citation

  • Kim, Min Jae & Lee, Ja Eun & Kim, Soo Yong & Kim, Kyungsik, 2010. "Two-phase phenomenon in linear and non-linear financial instruments," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(13), pages 2580-2585.
    • Handle: RePEc:eee:phsmap:v:389:y:2010:i:13:p:2580-2585
    DOI: 10.1016/j.physa.2010.02.031
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    Citations

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    Cited by:

    1. Kang, Bo Soo & Park, Chanhi & Ryu, Doojin & Song, Wonho, 2015. "Phase transition phenomenon: A compound measure analysis," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 428(C), pages 383-395.
    2. Ryu, Doojin, 2013. "What types of investors generate the two-phase phenomenon?," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(23), pages 5939-5946.
    3. Kang, Bo Soo & Ryu, Doojin & Ryu, Doowon, 2014. "Phase-shifting behaviour revisited: An alternative measure," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 401(C), pages 167-173.

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