This article investigates option models in the encompassing class of stochastic volatility, return-jumps, and volatility-jumps. Relying on individual equity options on the 50 most active firms and maximum likelihood estimation method, we obtain several findings. First, while stochastic...

Credit default swaps (CDS) are similar to out-of-the-money put options in that both offer a low cost and effective protection against downside risk. This study investigates whether put option-implied volatility is an important determinant of CDS spreads. Using a large sample of firms with both...

Credit default swaps (CDS) are similar to out-of-the-money put options in that both offer a low cost and effective protection against downside risk. This study investigates whether put option-implied volatility is an important determinant of CDS pricing. Using a large sample of firms with both...

Using the industry benchmark CreditGrades model to analyze credit default swap (CDS) spreads across a large number of companies during the 2007-09 credit crisis, the authors demonstrate that the performance of the model can be significantly improved by calibrating it with option-implied...

Default risk permeates the behavior of corporate bond returns and spreads, credit default swap spreads, estimation of default probabilities, and loss in default. Pertinent to this review are salient empirical findings and implications of default process estimation over 1974 to 2021. Both...