Abstract
This study utilizes swaptions data to quantify tail risk through the lens of the fixed income derivatives market. We adopt a non-parametric and model-independent approach to characterize tail risks in a three-dimensional space–time object. We further show that the implied tail risk surface has the predictive contents for stock returns, default risk, and economic uncertainty. There is a significant wedge between the proposed tail risk surface and the asset price dynamics in the financial market.
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