Arbeitspapier
Credit-Implied Forward Volatility and Volatility Expectations
We show how one can back out implied forward volatility term structures from credit default swap spreads. Such forward stock volatility term structures are useful for instance in forward start option pricing. We find the term structure to be downward-sloping, and the credit market's volatility forecasts tend to vary more across time than across maturities. Long-term volatility expectations, in turn, are found to be low and stable while short-term expectations are higher and more volatile. The volatility expectation's mean-reversion rate, finally, indicates that the credit market expects volatility shocks in the equity market to last for several years.
- Language
-
Englisch
- Bibliographic citation
-
Series: Working Paper ; No. 2015:34
- Classification
-
Wirtschaft
Financial Crises
General Financial Markets: General (includes Measurement and Data)
- Subject
-
CDS
implied volatility term structure
forward volatility
forward start options
- Event
-
Geistige Schöpfung
- (who)
-
Byström, Hans
- Event
-
Veröffentlichung
- (who)
-
Lund University, School of Economics and Management, Department of Economics
- (where)
-
Lund
- (when)
-
2015
- Handle
- Last update
-
10.03.2025, 11:43 AM CET
Data provider
This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Byström, Hans
- Lund University, School of Economics and Management, Department of Economics
Time of origin
- 2015
Other Objects (12)
Implied Volatility String Dynamics
Implied volatility string dynamics
Semiparametric modeling of implied volatility
Common Functional Implied Volatility Analysis
Common functional implied volatility analysis
Analysis of implied volatility surfaces
Calibration Design of Implied Volatility Surfaces
DSFM fitting of Implied Volatility Surfaces
DSFM fitting of implied volatility surfaces
Calibration design of implied volatility surfaces
Credit-Implied Equity Volatility – Long-Term Forecasts and Alternative Fear Gauges
Measuring uncertainty in monetary policy using implied volatility and realized volatility
Implied Volatility String Dynamics
Implied volatility string dynamics
Semiparametric modeling of implied volatility
Common Functional Implied Volatility Analysis
Common functional implied volatility analysis
Analysis of implied volatility surfaces
Calibration Design of Implied Volatility Surfaces
DSFM fitting of Implied Volatility Surfaces
DSFM fitting of implied volatility surfaces
Calibration design of implied volatility surfaces
Credit-Implied Equity Volatility – Long-Term Forecasts and Alternative Fear Gauges
Measuring uncertainty in monetary policy using implied volatility and realized volatility
Implied Volatility String Dynamics
Implied volatility string dynamics
Semiparametric modeling of implied volatility
Common Functional Implied Volatility Analysis
Common functional implied volatility analysis
Analysis of implied volatility surfaces
Calibration Design of Implied Volatility Surfaces
DSFM fitting of Implied Volatility Surfaces
DSFM fitting of implied volatility surfaces
Calibration design of implied volatility surfaces
Credit-Implied Equity Volatility – Long-Term Forecasts and Alternative Fear Gauges