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Options-based systemic risk, financial distress, and macroeconomic downturns
journal contribution
posted on 2023-06-10, 06:48 authored by Mattia Bevilacqua, Radu TunaruRadu Tunaru, Davide ViotoWe 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.
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- Published
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Journal of Financial MarketsISSN
1386-4181Publisher
ElsevierExternal DOI
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- Accounting and Finance Publications
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- Yes
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- Yes
Legacy Posted Date
2023-04-20First Open Access (FOA) Date
2023-05-18First Compliant Deposit (FCD) Date
2023-04-19Usage metrics
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