Firm-Specific Risk-Neutral Distributions with Options and CDS

Autor:	Samuel Rosen, Sirio Aramonte, John W. Schindler, Mohammad R. Jahan-Parvar
Rok vydání:	2022
Předmět:	Credit default swap business.industry Strategy and Management Econometrics Specific risk Distribution (economics) Management Science and Operations Research business Stock (geology)
Zdroj:	Management Science. 68:7018-7033
ISSN:	1526-5501 0025-1909
DOI:	10.1287/mnsc.2021.4170
Popis:	We propose a method to extract the risk-neutral distribution of firm-specific stock returns using both options and credit default swaps (CDS). Options and CDS provide information about the central part and the left tail of the distribution, respectively. Taken together, but not in isolation, options and CDS span the intermediate part of the distribution, which is driven by exposure to the risk of large, but not extreme, returns. Through a series of asset-pricing tests, we show that this intermediate-return risk carries a premium, particularly at times of heightened market stress. This paper was accepted by David Simchi-Levi, finance.
Databáze:	OpenAIRE
Externí odkaz:	https://explore.openaire.eu/search/publication?articleId=doi_________::a4b5d210cca67540c53c447d0e06d62a https://doi.org/10.1287/mnsc.2021.4170 Zobrazit plný text záznamu