The information content of option‐implied tail risk on the future returns of the underlying asset
Yaw‐Huei Wang and
Journal of Futures Markets, 2018, vol. 38, issue 4, 493-510
We compile option‐implied tail loss and gain measures based on a deep out‐of‐the‐money option pricing formula derived by applying “extreme value theory,” and then use these measures to investigate the information content of option‐implied tail risk on the future returns of the underlying assets. Our empirical analysis shows that both tail measures implied by S&P 500 and VIX options can predict future changes in the corresponding underlying assets and are informative on the future returns of the S&P 500 index. The relationships are particularly strong during periods of economic recession and driven by the tail‐risk premium.
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:wly:jfutmk:v:38:y:2018:i:4:p:493-510
Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0270-7314
Access Statistics for this article
Journal of Futures Markets is currently edited by Robert I. Webb
More articles in Journal of Futures Markets from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().