Credit default swaps (CDS) are similar to out-of-the-money put options in that both offer a low cost and effective protection against downside risk. This study investigates whether put option-implied volatility is an important determinant of CDS spreads. Using a large sample of firms with both...

Substantial progress has been made in developing more realistic option pricing models. Empirically, however, it is not known whether and by how much each generalization improves option pricing and hedging. The authors fill this gap by first deriving an option model that allows volatility,...

This article empirically analyzes some properties shared by all one-dimensional diffusion option models. Using S&P 500 options, we find that sampled intraday (or interday) call (put) prices often go down (up) even as the underlying price goes up, and call and put prices often increase, or...

We address questions about Chapter 11 stocks regarding their trading environment, fundamental value, and performance. First, there exists active trading for Chapter 11 stocks throughout the bankruptcy process. Second, equity value after filing is positively related to asset value, asset...

Diversification benefits of three “hot” asset classes—Commodity, Real Estate Investment Trusts (REITs), and Treasury Inflation-Protected Securities (TIPS)—are well-studied on an individual basis and in a static setting. Using data from 1970 to 2010, this paper documents both that the...

This paper examines the impact of central clearing on the credit default swap (CDS) market using a sample of voluntarily cleared single-name contracts. Consistent with central clearing reducing counterparty risk, CDS spreads increase around the commencement of central clearing and are lower than...