Bevilacqua, Mattia, Tunaru, Radu and Vioto, Davide (2023) Options-based systemic risk, financial distress, and macroeconomic downturns. Journal of Financial Markets, 65. ISSN 1386-4181
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Abstract
We extract an option-implied measure for systemic risk, the Systemic Options Value-at-Risk (SOVaR), from put option prices that can capture the buildup stage of systemic risk in the financial sector earlier than the standard systemic risk measures (SRMs). Our measure exhibits more timely early warning signals of main events around the global financial crisis than the main SRMs. SOVaR shows significant predictive power for macroeconomic downturns as well as future recessions up to one year ahead. Our results are robust to various specifications, breakdowns of financial sectors, and controlling for other main risk measures proposed in the literature.
Item Type: | Article |
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Official URL: | https://www.sciencedirect.com/journal/journal-of-f... |
Additional Information: | © 2023 The Author(s) |
Divisions: | Systemic Risk Centre |
Subjects: | H Social Sciences > HG Finance |
JEL classification: | G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency; Event Studies G - Financial Economics > G2 - Financial Institutions and Services > G20 - General |
Date Deposited: | 31 May 2023 16:33 |
Last Modified: | 07 Oct 2024 07:18 |
URI: | http://eprints.lse.ac.uk/id/eprint/119289 |
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