oil-price-volatility-and-option-implied-risk-connectedness-in-the-canadian-banking-sector

According to the report by the World Bank (2018)3 the driving force behind the price collapse was the “boom and rapid efficiency gains in U. [...] The oil price plunge was accompanied by a global economic slowdown (Canada is a net oil exporter and the fifth largest oil producer in the world; energy represented 13.7% of Canadian GDP in 2014.5) The risk for Canadian banks increased with the oil price declines and decreased after the crisis. [...] The interpretation of the connectedness varies depending on the variables in the VAR system. [...] 9 where, 𝑇𝑘 (𝑇𝑚) represents the number of days to expiration of the option (grid point); 𝛥𝑘 (𝛥𝑚 ) denotes the "call-equivalent delta" of the option (grid point); 𝐶𝑃𝑘 (𝐶𝑃𝑚 ) denotes the call/put identifier of the option (grid point); and I denotes an indicator function (equal to 0 if the call/put identifiers are the same, or 1 if they are different). [...] Despite this difference, the dynamics are very similar, peaking during the Covid-19 pandemic, the Global financial crisis, and the aftermath of the oil price collapse.