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Time-varying asset volatility and the credit spread puzzle

Du, Du; Elkamhi, Redouane; Ericsson, Jan - 2016

Most extant structural credit risk models underestimate credit spreads while matching default rates, recoveries, leverage, and equity risk premia - a shortcoming known as the credit spread puzzle. We calibrate and estimate a model able to explain medium to long-term credit spreads by...

Persistent link: https://www.econbiz.de/10011721554

Time-Varying Asset Volatility and the Credit Spread Puzzle

Elkamhi, Redouane; Ericsson, Jan; Jiang, Min - 2022

Structural credit risk models have faced difficulties in matching observed market credit spreads while simultaneously matching default rates, recoveries, leverage and risk premia - a shortcoming that has become known as the credit spread puzzle. We ask whether stochastic asset volatility, as an...

Persistent link: https://www.econbiz.de/10014238576

CDS Spreads Explained with Credit Spread Volatility and Jump Risk of Individual Firms

Kita, Arben - 2020

This paper attempts to explain the credit default swap (CDS) premium by using a novel approach to identify the …

Persistent link: https://www.econbiz.de/10012857216

Prices and volatilities in the corporate bond market

Bao, Jack; Chen, Jia; Hou, Kewei; Lu, Lei - 2015

We document a strong positive cross-sectional relation between corporate bond yield spreads and bond return volatilities. As corporate bond prices are generally attributable to both credit risk and illiquidity as discussed in Huang and Huang (2012), we apply a decomposition methodology to...

Persistent link: https://www.econbiz.de/10011772268

A Joint Analysis of the Term Structure of Credit Default Swap Spreads and the Implied Volatility Surface

Da Fonseca, José; Gottschalk, Katrin - 2023

This paper presents a joint analysis of the term structure of credit default swap (CDS) spreads and the implied … interaction with equity volatility has been analyzed in many studies. However, in most of them the 5-year credit default swap … study the co-movements of the term structure of credit default swap spreads and the implied volatility surface. We perform a …

Persistent link: https://www.econbiz.de/10014254192

A multivariate default model with spread and event risk

Mai, Jan-Frederik; Olivares, Pablo; Schenk, Steffen; … - In: Applied mathematical finance 21 (2014) 1/2, pp. 51-83

Persistent link: https://www.econbiz.de/10010351857

Disentangling Credit Spreads and Equity Volatility

d'Avernas, Adrien - 2018

In this paper, I provide a structural approach to quantify the forces that govern the joint dynamics of corporate bond credit spreads and equity volatility. I build a dynamic model and estimate a wide array of fundamental shocks using a large firm-level database on credit spreads, equity prices,...

Persistent link: https://www.econbiz.de/10012929361

Credit default swap spreads and variance risk premia

Wang, Hao; Zhou, Hao; Zhou, Yi - In: Journal of banking & finance 37 (2013) 10, pp. 3733-3746

Persistent link: https://www.econbiz.de/10010126846

Intra-Daily Variations in Volatility and Transaction Costs in the Credit Default Swap Market

Fulop, Andras - 2010

-space model of bid and ask quotes to infer the dynamics of volatility and transaction costs. The estimation uses new techniques …

Persistent link: https://www.econbiz.de/10013150232

Linear-rational term structure models

Filipović, Damir; Larsson, Martin; Trolle, Anders B. - 2014

We introduce the class of linear-rational term structure models in which the state price density is modeled such that bond prices become linear-rational functions of the factors. This class is highly tractable with several distinct advantages: i) ensures nonnegative interest rates, ii) easily...

Persistent link: https://www.econbiz.de/10010338764

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