The article examines what causes extreme risks in European stock markets. It looks at factors like market volatility, risk premiums, interest rates, default rates, and market liquidity. The study uses data from European stock indices from 2003 to 2013. The results show that market volatility, risk premiums, and default rates are important factors affecting extreme risks in all markets. Market-specific liquidity is crucial in certain markets, while interest rate trends matter more in core markets. Risk premiums are higher in riskier markets like PIIGS countries. This research helps investors and risk managers understand the key drivers of extreme risks in stock markets.