Abstract
In recent years, a liquid market for credit index (CDX) options has developed. We study the extent to which these options are priced consistently with S&P 500 (SPX) equity index options. We derive analytical expressions for CDX and SPX options within a rich structural credit risk model. The model captures many aspects of the joint dynamics of CDX and SPX options; however, it cannot reconcile the relative levels of option prices, suggesting that credit and equity markets are not fully integrated. A strategy of selling CDX volatility yields significantly higher average excess returns and Sharpe ratios than selling SPX volatility
| Originalsprog | Engelsk |
|---|---|
| Publikationsdato | 2022 |
| Antal sider | 116 |
| Status | Udgivet - 2022 |
| Begivenhed | The 82nd Annual Meeting of American Finance Association. AFA 2022: Part of the ASSA 2022 Virtual Annual Meeting - , WWW Varighed: 7 jan. 2022 → 9 jan. 2022 Konferencens nummer: 82 https://www.aeaweb.org/conference/ |
Konference
| Konference | The 82nd Annual Meeting of American Finance Association. AFA 2022 |
|---|---|
| Nummer | 82 |
| Land/Område | WWW |
| Periode | 07/01/2022 → 09/01/2022 |
| Internetadresse |
Emneord
- Credit risk
- CDX
- CDX options
- SPX
- SPX options
- Structural models