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...

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...

This paper examines the effects of public news releases on the market liquidity in one of the most important OTC derivatives markets — the CDS market. We document that, at the time of news releases, the bid-ask spread is wider, the number of quotes is larger, and the number of dealers is...

In this research study, we develop a new measure based on the option market to address the information role of earnings announcement on uninformed traders. Enlightened by previous theoretical work by Kim and Verrecchia (1991, 1994) and empirical findings in Patell and Wolfson (1979, 1981), our...

We provide evidence that an option implied volatility-based measure predicts future absolute excess returns of the underlying stock around earnings announcements and annual meetings of shareholders, even after controlling for the realized stock return volatility shortly before these information...