Bank Opacity and Tail Risk during the Financial Crisis

2012 ◽  
Author(s):  
Lee J. Cohen ◽  
Marcia Millon Cornett ◽  
Alan J. Marcus ◽  
Hassan Tehranian
Keyword(s):  
Financial Crisis ◽  
Tail Risk

scholarly journals Too-Systemic-to-Fail: What Option Markets Imply about Sector-Wide Government Guarantees

2016 ◽  
Vol 106 (6) ◽  
pp. 1278-1319 ◽  
Author(s):  
Bryan Kelly ◽  
Hanno Lustig ◽  
Stijn Van Nieuwerburgh
Keyword(s):  
Financial Crisis ◽  
Financial Sector ◽  
Tail Risk ◽  
Option Markets ◽  
Put Options ◽  
Government Guarantee ◽  
The Difference ◽  
The Cost

We examine the pricing of financial crash insurance during the 2007–2009 financial crisis in US option markets, and we show that a large amount of aggregate tail risk is missing from the cost of financial sector crash insurance during the crisis. The difference in costs between out-of-the-money put options for individual banks and puts on the financial sector index increases four-fold from its precrisis 2003–2007 level. We provide evidence that a collective government guarantee for the financial sector lowers index put prices far more than those of individual banks and explains the increase in the basket-index put spread. (JEL E44, G01, G13, G21, G28, H81)

Bank Earnings Management and Tail Risk during the Financial Crisis

2014 ◽  
Vol 46 (1) ◽  
pp. 171-197 ◽  
Author(s):  
LEE J. COHEN ◽  
MARCIA MILLON CORNETT ◽  
ALAN J. MARCUS ◽  
HASSAN TEHRANIAN
Keyword(s):  
Financial Crisis ◽  
Earnings Management ◽  
Tail Risk
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