Credit-Implied Equity Volatility – Long-Term Forecasts and Alternative Fear Gauges

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Sammanfattning

This study discusses how to compute and forecast long-term stock return volatilities, typically with a five-year horizon or longer, using credit derivatives, and how such volatilities can be used in different areas ranging from the valuation of employee stock options and other long-term derivatives to the construction of market-based fear gauges in selected countries or market segments. In the empirical part of the paper I focus on the European financial sector and find the credit-implied volatilities and fear gauges to behave well. The forecasting accuracy of the credit-implied volatilities is found to be better than that of horizon-matched historical volatilities. (c) 2014 The Authors. Journal of Futures Markets Published by Wiley Periodicals, Inc. Jrl Fut Mark 35:753-775, 2015
Originalspråkengelska
Sidor (från-till)753-775
Antal sidor46
TidskriftJournal of Futures Markets
Volym35
Nummer8
DOI
StatusPublished - 2015

Ämnesklassifikation (UKÄ)

  • Nationalekonomi

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