IDEAS home Printed from https://ideas.repec.org/a/ids/ijfmkd/v3y2012i1p36-44.html
   My bibliography  Save this article

Regime dependent causality: equity and credit markets

Author

Listed:
  • Ramaprasad Bhar
  • David B. Colwell
  • Peipei Wang

Abstract

We apply a Markov switching model to investigate the possibility of an asymmetric causal relationship between the volatility process inferred from the iTraxx CDS options market and the implied volatility from the stock index options market. We find strong evidence that the stock market leads the CDS market and the effect of the implied stock market volatility is more significant during the volatile regime. We also find that a large jump in the stock return, up or down, may indeed be followed by a regime shift.

Suggested Citation

  • Ramaprasad Bhar & David B. Colwell & Peipei Wang, 2012. "Regime dependent causality: equity and credit markets," International Journal of Financial Markets and Derivatives, Inderscience Enterprises Ltd, vol. 3(1), pages 36-44.
    • Handle: RePEc:ids:ijfmkd:v:3:y:2012:i:1:p:36-44
    as

    Download full text from publisher

    File URL: http://www.inderscience.com/link.php?id=53326
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ids:ijfmkd:v:3:y:2012:i:1:p:36-44. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sarah Parker (email available below). General contact details of provider: http://www.inderscience.com/browse/index.php?journalID=307 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.