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A Simple Econometric Approach for Modeling Stress Event Intensities

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  • Rainer Jobst
  • Daniel Rösch
  • Harald Scheule
  • Martin Schmelzle

Abstract

This paper introduces a simple, non‐parametric way of inferring risk‐neutral credit stress event intensities for idiosyncratic, sectoral, and global shocks contained in market credit spreads. We provide an econometric analysis of the implied latent stress event dynamics. A vector autoregressive regression model with exogenous variables finds that these intensities can be related to an observable stock market index, the market volatility, the volatility skew, and treasury yields. © 2014 Wiley Periodicals, Inc. Jrl Fut Mark 35:300–320, 2015

Suggested Citation

  • Rainer Jobst & Daniel Rösch & Harald Scheule & Martin Schmelzle, 2015. "A Simple Econometric Approach for Modeling Stress Event Intensities," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 35(4), pages 300-320, April.
    • Handle: RePEc:wly:jfutmk:v:35:y:2015:i:4:p:300-320
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