This paper focuses on the many extreme credit default swap spread movements observed during the recent credit crisis and on how the tails of the spread (and price) change distribution significantly differ from those of the normal distribution even for diversified credit derivatives portfolios....

In this paper we compute long-term stock return expectations (across the business cycle) for individual firms using information backed out from the credit derivatives market. Our methodology builds on previous theoretical results in the literature on stock return expectations and, empirically,...