What Option Prices Say About Equity-Market Risk
Video
May 7, 2020
John Burke The prices of put options imply an elevated chance of further drawdowns in the U.S. equity markets over the coming months. These risk-neutral probabilities neglect a risk-premium component of option prices, and may overstate the actual probability of a drawdown, but they are indicative of markets' changing views of the likelihood of a crisis. Read our blog on the topic. How to interact with this plot: Click and drag on the bottom sub-chart to zoom in on any period. Use the boxes in the legend to select a horizon and drawdown and hold the shift key to select multiple values.
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Source: OptionMetrics, MSCI
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