Here's the key insight: when a banking system operates with limited solvency buffers, equity valuations shift into something closer to options. Why? Because share prices become a direct reflection of expected economic growth trajectories. Consider the data point—banks trading at 3-4x their book value isn't random. It's the market pricing in future GDP expansion scenarios. The option framework elegantly captures this dynamic: shareholders hold call options on growth, while downside risk concentrates in the debt structure. This mechanism reveals why equity markets often lead economic signals rather than just follow them.