Black Monday is the name commonly given to the global, sudden, severe, and largely unexpected stock market crash on Monday, October 19, 1987. In Australia and New Zealand, the day is also referred to as Black Tuesday because of the time zone difference from other English-speaking countries. All of the twenty-three major world markets experienced a sharp decline in October 1987. When measured in United States dollars, eight markets declined by 20 to 29%, three by 30 to 39% (Malaysia, Mexico and New Zealand), and three by more than 40% (Hong Kong, Australia and Singapore). The least affected was Austria (a fall of 11.4%) while the most affected was Hong Kong with a drop of 45.8%. Out of twenty-three major industrial countries, nineteen had a decline greater than 20%. Worldwide losses were estimated at US$1.71 trillion. The severity of the crash sparked fears of extended economic instability or even a reprise of the Great Depression. The degree to which the stock market crashes spread to the wider economy (or "real economy") was directly related to the monetary policy each nation pursued in response. The central banks of the United States, West Germany and Japan provided market liquidity to prevent debt defaults among financial institutions, and the impact on the real economy was relatively limited and short-lived. However, refusal to loosen monetary policy by the Reserve Bank of New Zealand had sharply negative and relatively long-term consequences for both financial markets and the real economy in New Zealand. The crash of 1987 also altered implied volatility patterns that arise in pricing financial options. Equity options traded in American markets did not show a volatility smile before the crash but began showing one afterward. United States Background From August 1982 to its peak in August 1987, the Dow Jones Industrial Average (DJIA) rose from 776 to 2,722, including a 69% year-to-date rise as of August 1987. The rise in market indices for the nineteen largest markets in the world averaged 296% during this period. The average number of shares traded on the New York Stock Exchange rose from 32 million shares to 181 million shares. In late 1985 and early 1986, the United States economy shifted from a rapid recovery from the early 1980s recession to a slower expansion, resulting in a brief "soft landing" period as the economy slowed and inflation dropped. On the morning of Wednesday, October 14, 1987, the