Asymmetric Network Connectedness of Fears
Jozef Baruník (),
Mattia Bevilacqua and
Papers from arXiv.org
This paper introduces forward-looking measures of the network connectedness of fears in the financial system, arising due to the good and bad beliefs of market participants about uncertainty that spreads unequally across a network of banks. We argue that this asymmetric network structure extracted from call and put traded option prices of the main U.S. banks contains valuable information for predicting macroeconomic conditions and economic uncertainty, and it can serve as a tool for forward-looking systemic risk monitoring.
Date: 2018-10, Revised 2020-10
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Working Paper: Asymmetric network connectedness of fears (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1810.12022
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