Asymmetric network connectedness of fears

Jozef Baruník, Mattia Bevilacqua and Radu Tunaru

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: 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.

JEL-codes: C1 J1 (search for similar items in EconPapers)
Pages: 13 pages
Date: 2022-11-14
New Economics Papers: this item is included in nep-net and nep-rmg
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Citations: View citations in EconPapers (7)

Published in Review of Economics and Statistics, 14, November, 2022, 104(6), pp. 1304 - 1316. ISSN: 0034-6535

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http://eprints.lse.ac.uk/108199/ Open access version. (application/pdf)

Related works:
Journal Article: Asymmetric Network Connectedness of Fears (2022)
Working Paper: Asymmetric Network Connectedness of Fears (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:108199

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