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.
Original language | English |
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Pages (from-to) | 107-111 |
Number of pages | 5 |
Journal | Finance Research Letters |
Volume | 28 |
DOIs | |
Publication status | Published - Mar 2019 |
Externally published | Yes |
Keywords
- CDS market
- Fractional cointegration
- Implied volatility
- Options market
- Volatility discovery