Hui, Cho-Hoi; Lo, Chi-Fai; Lau, Chun-Sing - In: Journal of Banking & Finance 37 (2013) 9, pp. 3694-3703
This paper proposes an analytic method to estimate the option-implied correlation embedded in options on the iTraxx Europe CDS indexes. The option-implied correlation is suggested as a measure of the spillover effect of default risk between the financial and corporate sectors in Europe. In...