Download or read book The Information Content of Option-Implied Tail Risk on the Future Returns of the Underlying Asset written by Yaw-Huei Wang and published by . This book was released on 2017 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.