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lower price errors in the underlying. The more popular options are, the more quickly information is incorporated in the …
Persistent link: https://www.econbiz.de/10010731401
Abstract: In this paper we compare market prices of credit default swaps with model prices. We show that a simple reduced form model with a constant recovery rate outperforms the market practice of directly comparing bonds' credit spreads to default swap premiums. We find that the model works...
Persistent link: https://www.econbiz.de/10010837529