On the lognormality of forward credit default swap spreads
The market for credit default swaps continues to grow in terms of the number of underlying traded names and transactions as well as notional volumes outstanding. With the growth in credit default swaps it is natural to expect a market for options on credit default swaps to follow. Options on credit default swaps exist but are thinly traded via the over-the-counter market and the current modeling paradigm is based on the Black-Scholes framework. The underlying for an option on a credit default swap is the forward credit default swap spread for a particular reference entity. This paper examines the statistical properties of forward default swap spreads and strongly rejects the hypothesis that they are lognormally distributed. Furthermore, the analysis in this paper rules out credit migrations as the sole cause for the significant deviation from normality.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Volume (Year): 22 (2008)
Issue (Month): ()
|Contact details of provider:|| Postal: |
Phone: +1 212 284 8600
Web page: http://www.capco.com/
When requesting a correction, please mention this item's handle: RePEc:ris:jofitr:0870. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Springett)
If references are entirely missing, you can add them using this form.