Journal of Financial Services Research

, Volume 42, Issue 1, pp 35-54

First online:

Open Access This content is freely available online to anyone, anywhere at any time.

Forward-Looking Tail Risk Exposures at U.S. Bank Holding Companies

  • Martin KnaupAffiliated withCentER, European Banking Center, and Department of Economics, Tilburg University
  • , Wolf WagnerAffiliated withCentER, European Banking Center, TILEC, and Department of Economics, Tilburg UniversityDuisenberg School of Finance Email author 


This paper develops a simple method for quantifying banks’ exposures to large (negative) shocks in a forward-looking manner. The method is based on estimating banks’ share prices sensitivities to (market) put options and does not require the actual observation of tail risk events. We find that estimated (excess) tail risk exposures for U.S. Bank Holding Companies are negatively correlated with their share price beta, suggesting that banks which appear safer in normal periods are actually more crisis prone than their beta would suggest. We also study the determinants of banks’ tail risk exposures and find that their key drivers are uninsured deposits and non-traditional activities that leave assets on banks’ balance sheets.


Tail risk Forward-looking Banks Systemic crisis

JEL Classification

G21 G28