BUSINESS SCHOOL RESEARCH SEMINAR - Government Put: What Options Market Imply about the Volatility and Left-tail Risk of Indian Public versus Private Banks

BUSINESS SCHOOL RESEARCH SEMINAR - Government Put: What Options Market Imply about the Volatility and Left-tail Risk of Indian Public versus Private Banks
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This is a past event

The seminar will be held in person in University Office Court Room 2 on Wednesday 22nd November from 15:00-16:15.

Join Dr Pranjal Srivastava to hear more on Indian Public versus Private Banks.

Abstract: We examine the differences in the options implied left-tail risk and volatility of government-owned and private banks in India. We show that left-tail risk and the cost of insurance for protection against it are high for private banks as compared to government-owned banks in general and the difference widens during the high systematic risk period of the COVID-19 crisis. The gap exists despite private banks having better asset quality than their public counterparts. Contrary to our left-tail risk result, we find that government-owned banks have higher near-the-money options implied volatility than private banks, and this gap widens during a period characterised by high policy uncertainty, the central bank's asset quality review. Our findings lend support to the notion that government ownership lower expected downside risk, but riskier lending policies, and subsequent uncertainty about capital infusion lead to higher expected volatility.

 

Speaker
Dr Pranjal Srivastava
Hosted by
University of Aberdeen Business School
Contact

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