This paper provides new evidence on the dynamic dependences of European corporate credit spread in three markets: Bond, Credit Default Swap (CDS), and Asset Swap (ASP). Using daily data from 2005 to 2009, we find that credit spread returns are primarily driven by innovations. The intra-market...

The importance of collateralization through the change of funding cost is now well recognized among practitioners. In this article, we have extended the previous studies of collateralized derivative pricing to more generic situation, that is asymmetric and imperfect collateralization with the...

Recently, global credit derivative markets have expanded very fast. Despite the fast growth, little is known whether their use is beneficial or increases their risk exposure. The few empirical papers that exist in this area relate primarily to the American market and there are no works referred...

Traders worldwide use interest rate options and futures to speculate on future monetary decisions, in particular in countries where the monetary regime is Inflation Targeting (IT). Central Banks under an IT regime tend to define the target rate on scheduled meetings. We propose in this paper a...

In this article we derive risk-neutral option price formulas for both plain-vanilla and exotic electricity futures derivatives on the basis of diverse arithmetic multi-factor Ornstein-Uhlenbeck spot price models admitting seasonality, while – in order to avoid “information...

Were eighteenth-century financial markets efficient? Neal (1990) shows that the London and Amsterdam markets were integrated. Yet some scholars find that the London capital market was either not integrated across various classes of securities, or was comprised of ignorant investors who were not...

The implied volatility from Black and Scholes (1973) model has been empirically tested for the forecasting performance of future volatility and commonly shown to be biased. Based on the belief that the implied volatility from option prices is the best estimate of future volatility, this study...

We propose a method to extract the risk-neutral distribution of firm-specific stock returns using both options and credit default swaps (CDS). Options and CDS provide information about the central part and the left tail of the distribution, respectively. Together but not in isolation, options...

We examine unexplored factors that affect the ex-post adoption rates of newly listed stock options. We show that a variety of measures of information asymmetries concerning underlying stocks predict option adoption rates. These predictive relationships are robust after including factors that...

Trillions of dollars of derivatives are trading in many markets regularly, but little is known about the direct interactions between different types of derivatives referencing the same firm. This study is the first to examine the impact of credit derivatives on equity derivatives. We show that...