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Are European Corporate Bond and Default Swap Markets Segmented?

Cossin, Didier; Lu, Hongze - Swiss Finance Institute - 2005

and CDS rates behave in a much closer way than previous studies have shown. We also find that high equity volatility …

Persistent link: https://www.econbiz.de/10005771833

Härdle, Wolfgang; Mysickova, Alena - Sonderforschungsbereich 649: Ökonomisches Risiko, … - 2008

on the BS implied volatility. Implied binomial trees (IBT) models capture the variations of the implied volatility known … as \volatility smile". They provide a discrete approximation to the continuous risk neutral process for the underlying … Barle and Cakici (BC). After the formation of IBT we can estimate the implied local volatility and the state price density …

Persistent link: https://www.econbiz.de/10005677880

A Non-Parametric Test of the Conditional CAPM for the Mexican Economy

Castillo-Spíndola, Jorge H. del - In: Estudios Económicos 21 (2006) 2, pp. 275-297

Many models have been suggested to describe how investors manage risk and value risky cash flows. Among them, the most widely used is the Sharpe-Lintner-Black Capital Asset Pricing Model (CAPM). However many anomalies and evidence against this version have been presented. To assume that the CAPM...

Persistent link: https://www.econbiz.de/10005434714

An Empirical Comparison of Default Swap Pricing Models

Houweling, Patrick; Vorst, Ton - EconWPA - 2001

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 well for...

Persistent link: https://www.econbiz.de/10005413092

Forecasting Implied Volatility Surfaces

Audrino, Francesco; Colagelo, Dominik - School of Economics and Political Science, Universität … - 2007

We propose a new semi-parametric model for the implied volatility surface, which incorporates machine learning … implied volatility. To overcome the poor predicting power of existing models, we include a grid in the region of interest, and …

Persistent link: https://www.econbiz.de/10005453978

The pricing of unexpected credit losses

Amato, Jeffery D.; Remolona, Eli M - Bank for International Settlements (BIS) - 2005

Why are spreads on corporate bonds so wide relative to expected losses from default? The spread on Baa-rated bonds, for example, has been about four times the expected loss. We suggest that the most commonly cited explanations – taxes, liquidity and systematic diffusive risk – are...

Persistent link: https://www.econbiz.de/10005063360

Macro factors in the term structure of credit spreads

Luisi, Maurizio; Amato, Jeffery D. - Bank for International Settlements (BIS) - 2006

We estimate arbitrage-free term structure models of US Treasury yields and spreads on BBB and Brated corporate bonds in a doubly-stochastic intensity-based framework. A novel feature of our analysis is the inclusion of macroeconomic variables – indicators of real activity, inflation and...

Persistent link: https://www.econbiz.de/10005063368

Autorregresive conditional volatility, skewness and kurtosis

León, Angel; Serna, Gregorio; Rubio Irigoyen, Gonzalo - Departamento de Fundamentos del Análisis Económico … - 2002

This paper proposes a GARCH-type model allowing for time-varying volatility, skewness and kurtosis. The model is …

Persistent link: https://www.econbiz.de/10004972691

Parametric estimation of risk neutral density functions

Grith, Maria; Krätschmer, Volker - Sonderforschungsbereich 649: Ökonomisches Risiko, … - 2010

This chapter deals with the estimation of risk neutral distributions for pricing index options resulting from the hypothesis of the risk neutral valuation principle. After justifying this hypothesis, we shall focus on parametric estimation methods for the risk neutral density functions...

Persistent link: https://www.econbiz.de/10008492664

An Empirical Comparison of Default Swap Pricing Models

Houweling, Patrick; Vorst, Ton - Faculteit der Economische Wetenschappen, Erasmus … - 2002

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/10010731658