Back to Search
Start Over
Synthetic Options and Implied Volatility for the Corporate Bond Market.
- Source :
- Journal of Financial & Quantitative Analysis; May2023, Vol. 58 Issue 3, p1295-1325, 31p
- Publication Year :
- 2023
-
Abstract
- We synthetically create option contracts on a corporate bond index using CDX swaptions, overcoming the limitations that stem from the lack of traded corporate bond options. Our approach allows us to estimate forward-looking moments concerning the corporate bond market in a model-free manner. By constructing an aggregate volatility measure and the associated variance risk premium, we examine the role of volatility risk in the corporate bond market. We highlight that the ex ante conditional second and higher moments we estimate from synthetic corporate bond options carry important implications for credit risk models, providing an extra basis for testing their validity. [ABSTRACT FROM AUTHOR]
- Subjects :
- CORPORATE bonds
BOND market
RISK premiums
CREDIT risk
MARKET volatility
Subjects
Details
- Language :
- English
- ISSN :
- 00221090
- Volume :
- 58
- Issue :
- 3
- Database :
- Complementary Index
- Journal :
- Journal of Financial & Quantitative Analysis
- Publication Type :
- Academic Journal
- Accession number :
- 163518334
- Full Text :
- https://doi.org/10.1017/S0022109022000096