Cremers, Martijn; Driessen, Joost; Maenhout, Pascal; … - Bank for International Settlements (BIS) - 2005
Prices of equity index put options contain information on the price of systematic downward jump risk. We use a structural jump-diffusion firm value model to assess the level of credit spreads that is generated by option-implied jump risk premia. In our compound option pricing model, an equity...