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An Empirical Investigation of CDS Spreads Using a Regime Switching Default Risk Model
Milidonis, Andreas - 2015
Default risk in equity returns can be measured by structural models of default. In this paper we propose a credit warning signal (CWS) based on the Merton default risk (MDR) model and a Regime-switching default risk (RSDR) model. The RSDR model is a generalization of the MDR model, comprises...
Persistent link: https://www.econbiz.de/10013021368
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Forecasting Sovereign Default risk with Merton’s Model
Duyvesteyn, Johan G. - 2016
Merton's structural model for sovereigns is proven to be useful to analyze the default risk of a country. We are the first to investigate how fast CDS spreads react to changes in model inputs and outputs. CDS spread changes strongly correlate with exchange rate returns, which are an input to the...
Persistent link: https://www.econbiz.de/10013008626
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Extracting Option-Implied Probability of Default : A Novel Method
Orosi, Greg - 2019
In this paper, we present a novel method to extract the risk-neutral probability of default from American put option prices. Under the assumptions of Carr and Wu (2011), we derive a closed form expression for American put options from which the probability of default can be inferred. Our...
Persistent link: https://www.econbiz.de/10012863513
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Firm Heterogeneity and Credit Risk Diversification
Pesaran, M. Hashem - 2013
This paper considers a simple model of credit risk and derives the limit distribution of losses under different assumptions regarding the structure of systematic and idiosyncratic risks and the nature of firm heterogeneity. It documents a rich and complex interaction between the underlying model...
Persistent link: https://www.econbiz.de/10012754519
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Jumps in option prices and their determinants : real-time evidence from the E-mini S&P 500 option market
Kapetanios, George; Neumann, Michael; Skiadopoulos, George - 2014
We study the real-time characteristics and drivers of jumps in option prices. To this end, we employ high frequency data from the 24-hour E-mini S&P 500 options market. We find that option prices do not jump simultaneously across strikes and maturities and are uncorrelated with jumps in the...
Persistent link: https://www.econbiz.de/10010472845
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Liquid Staking : Basis Determinants and Price Discovery
Scharnowski, Stefan; Jahanshahloo, Hossein - 2022
liquidity is low, but smaller on weekdays and when investors pay more attention to liquid staking. Furthermore, liquid staking …
Persistent link: https://www.econbiz.de/10013403348
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Secured and Unsecured Debt in Creditor-friendly Bankruptcy
Francois, Pascal; Naqvi, Hassan - 2022
This article develops a continuous-time asset pricing model for valuing corporate securities in the presence of secured and unsecured debt. We consider a framework where creditors dominate the renegotiation process. We show that the unsecured creditors are incentivized to liquidate the firm...
Persistent link: https://www.econbiz.de/10014239730
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Liquidity Risk of Corporate Bond Returns : A Conditional Approach
Acharya, Viral V. - 2012
We study the exposure of the U.S. corporate bond returns to liquidity shocks of stocks and treasury bonds over the … period 1973-2007 in a regime switching model. In one regime, liquidity shocks have mostly insignificant effect on bond prices … default), suggest the existence of time-varying liquidity risk of corporate bond returns conditional on episodes of flight to …
Persistent link: https://www.econbiz.de/10013116102
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Liquidity Considerations in Estimating Implied Volatility
Grover, Rohini - 2011
Option markets have significant variation in liquidity across different option series. Illiquidity reduces the … attached to illiquid options. We find that this liquidity weighted scheme outperforms conventional schemes such as the …
Persistent link: https://www.econbiz.de/10013125624
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The effectiveness of the FX market interventions of the Bundesbank during the Louvre period : an options-based analysis
Pierdzioch, Christian - 2000
Persistent link: https://www.econbiz.de/10001465153