Tattle-tails: Gauging downside risks using option prices

Greg Adams and Maksym Tupis

No 2023-13, Staff Analytical Notes from Bank of Canada

Abstract: Options markets offer unique insights into the changing risks different assets face, which helps us better understand the broader risks to the Canadian economy. We show how option prices help reveal that investors did not anticipate large downside risks to either major Canadian banks or economic growth during the March 2023 financial sector system stress, a period when policy-makers and investors were unsure of what the future held for Canada’s economy.

Keywords: Financial markets; Monetary policy and uncertainty; Recent economic and financial developments (search for similar items in EconPapers)
JEL-codes: E4 E44 E5 E52 (search for similar items in EconPapers)
Date: 2023-09
New Economics Papers: this item is included in nep-ger and nep-rmg
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