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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.

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