We study how shocks to the forward-looking expectations of investors buying call and put options transmit across the financial system. We introduce a new contagion measure, called asymmetric fear connectedness (AFC), which captures the information related to "fear" on the two sides of the options market and can be used as a forward-looking systemic risk monitoring tool. The decomposed connectedness measures provide timely predictive information for near-future macroeconomic conditions and uncertainty indicators, and they contain additional valuable information that is not included in the aggregate connectedness measure. The role of a positive/negative "fear" transmitter/receiver emerges clearly when we focus more closely on idiosyncratic events for financial institutions. We identify banks that are predominantly positive/negative receivers of "fear", as well as banks that positively/negatively transmit "fear" in the financial system.
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