Volatility discovery: Can the CDS market beat the equity options market?

S. Forte Arcos; Lidija Lovreta

doi:10.1016/j.frl.2018.04.015

Volatility discovery: Can the CDS market beat the equity options market?

S. Forte Arcos, Lidija Lovreta

Producció científica: Article en revista indexada › Article › Avaluat per experts

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Resum

In this study, we derive a CDS implied equity volatility index from highly liquid one-year contracts in the Eurozone, and for the inclusive period 2008–2014. We analyze the relationship between this volatility index and the VSTOXX 12 M within a fractionally cointegrated vector autoregressive (FCVAR) model. Our results confirm a stationary long-run equilibrium relationship between the two volatility indices in which the CDS implied index plays the leading role.

Idioma original	Anglès
Pàgines (de-a)	107-111
Nombre de pàgines	5
Revista	Finance Research Letters
Volum	28
DOIs	https://doi.org/10.1016/j.frl.2018.04.015
Estat de la publicació	Publicada - de març 2019
Publicat externament	Sí

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@article{9bac5d5ede364bd5b47b161bc7bdd674,

title = "Volatility discovery: Can the CDS market beat the equity options market?",

abstract = "In this study, we derive a CDS implied equity volatility index from highly liquid one-year contracts in the Eurozone, and for the inclusive period 2008–2014. We analyze the relationship between this volatility index and the VSTOXX 12 M within a fractionally cointegrated vector autoregressive (FCVAR) model. Our results confirm a stationary long-run equilibrium relationship between the two volatility indices in which the CDS implied index plays the leading role.",

keywords = "CDS market, Fractional cointegration, Implied volatility, Options market, Volatility discovery",

author = "{Forte Arcos}, S. and Lidija Lovreta",

note = "Publisher Copyright: {\textcopyright} 2018 Elsevier Inc.",

year = "2019",

month = mar,

doi = "10.1016/j.frl.2018.04.015",

language = "English",

volume = "28",

pages = "107--111",

journal = "Finance Research Letters",

issn = "1544-6123",

publisher = "Elsevier B.V.",

}

TY - JOUR

T1 - Volatility discovery

T2 - Can the CDS market beat the equity options market?

AU - Forte Arcos, S.

AU - Lovreta, Lidija

PY - 2019/3

Y1 - 2019/3

N2 - In this study, we derive a CDS implied equity volatility index from highly liquid one-year contracts in the Eurozone, and for the inclusive period 2008–2014. We analyze the relationship between this volatility index and the VSTOXX 12 M within a fractionally cointegrated vector autoregressive (FCVAR) model. Our results confirm a stationary long-run equilibrium relationship between the two volatility indices in which the CDS implied index plays the leading role.

AB - In this study, we derive a CDS implied equity volatility index from highly liquid one-year contracts in the Eurozone, and for the inclusive period 2008–2014. We analyze the relationship between this volatility index and the VSTOXX 12 M within a fractionally cointegrated vector autoregressive (FCVAR) model. Our results confirm a stationary long-run equilibrium relationship between the two volatility indices in which the CDS implied index plays the leading role.

KW - CDS market

KW - Fractional cointegration

KW - Implied volatility

KW - Options market

KW - Volatility discovery

UR - http://www.scopus.com/inward/record.url?scp=85046734793&partnerID=8YFLogxK

U2 - 10.1016/j.frl.2018.04.015

DO - 10.1016/j.frl.2018.04.015

M3 - Article

AN - SCOPUS:85046734793

SN - 1544-6123

VL - 28

SP - 107

EP - 111

JO - Finance Research Letters

JF - Finance Research Letters

ER -

Volatility discovery: Can the CDS market beat the equity options market?

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