Purpose – This paper aims to investigate informational efficiency of stock, options and credit default swap (CDS) markets. Previous research suggests that informed traders prefer equity option and CDS markets over stock markets to exploit their informational advantage. As a result, equity and...

Using an equilibrium asset and option pricing model in a production economy under jump diffusion, we show theoretically that the aggregated excess market returns can be predicted by the skewness risk premium, which is constructed to be the difference between the physical and the risk-neutral...

In this paper, we empirically investigate the impact of the credit risk of Eurozone member countries on the stability of the Euro. In the absence of a common euro bond, euro-area credit risk is induced though the credit default swaps of the member countries. The stability of the euro is examined...

The record-breaking prices observed in the art market for the last three years have rais the question of whether we are experiencing a speculative bubble. Given the difficulty to determine the fundamental value of artworks, we apply a right-tailed unit root test with forward recursive...

This paper explores the impacts of key policy actions by US and European authorities on stock returns of systemically important banks in Europe and US around the subprime crisis. We find that the US policy announcements had a stronger impact on the European and US banking industry than the...

In this study, we empirically investigate and evaluate various approaches to structurally assess credit risk using a panel of European banking groups. We consider not only the standard approaches in the literature, but also include models that allow the asset volatility to be stochastic and...

Proponents of the efficient markets hypothesis would claim that investors correctly and timely incorporate new information into asset prices. Bayesian rationality is assumed to be a good description of investor behavior (Fama (1965, 1970)). However, the quality of information disclosure differs...

It is a well-documented empirical fact that index option prices systematically differ from Black-Scholes prices. However, previous research provides inconclusive results whether the observed volatility smile could be explained by a discretetime dynamic model of stock returns with skewed,...

In this study, we investigate the dynamics behind informed investors trading decisions among European stock, options and credit default swap markets. This allows us to identify the predictive explanatory power of the unique information contained in each market with respect to future stock, CDS...

Empirical studies have shown that implied volatilities of long-term options react quite strongly to changes in implied volatilities of short-term options and do not display the rationally expected smoothing behavior. Given the observed strong mean-reversion in volatility, those findings have...