In order to analyze the pricing of portfolio credit risk – as revealed by tranche spreads of a popular credit default swap (CDS) index – we extract risk-neutral probabilities of default (PDs) and physical asset return correlations from single-name CDS spreads. The time profile and overall...

order to analyze the pricing of portfolio credit risk as revealed by tranche spreads of a popular credit default swap (CDS) index we extract risk-neutral probabilities of default (PDs) and physical asset return correlations from single-name CDS spreads. The time profile and overall level of...

We study a unique experiment to examine the importance of rating agencies' private information for bank shareholders. On July 20, 2011, Fitch Ratings refined their bank standalone ratings, which measure intrinsic financial strength, from a 9-point to a 21-point scale. This refinement did not...

In order to analyze the pricing of portfolio credit risk – as revealed by tranche spreads of a popular credit default swap (CDS) index – we extract risk-neutral probabilities of default (PDs) and physical asset return correlations from single-name CDS spreads. The time profile and overall...

A measure of risk premium is derived from the comparison of spot and option prices across the US equity and euro dollar markets. Risk premia in both markets co-move with volatility risk. Option prices, however, seem to underreact to changes in return volatility forecasts