Credit-Implied Equity Volatility – Long-Term Forecasts and Alternative Fear Gauges
(2015) In Journal of Futures Markets 35(8). p.753-775- Abstract
- 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... (More)
- 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 (Less)
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/record/7779803
- author
- Byström, Hans LU
- organization
- publishing date
- 2015
- type
- Contribution to journal
- publication status
- published
- subject
- keywords
- credit default swaps, implied volatility, CreditGrades, VIX, fear gauge, long-term forecast
- in
- Journal of Futures Markets
- volume
- 35
- issue
- 8
- pages
- 46 pages
- publisher
- John Wiley & Sons Inc.
- external identifiers
-
- wos:000357887300005
- scopus:84936985939
- ISSN
- 1096-9934
- DOI
- 10.1002/fut.21701
- language
- English
- LU publication?
- yes
- id
- 3cc847ee-5f1f-40f8-baa2-bc071d7b1d97 (old id 7779803)
- alternative location
- http://project.nek.lu.se/publications/workpap/papers/wp14_34.pdf
- date added to LUP
- 2016-04-01 10:33:30
- date last changed
- 2022-04-12 07:29:33
@article{3cc847ee-5f1f-40f8-baa2-bc071d7b1d97,
abstract = {{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}},
author = {{Byström, Hans}},
issn = {{1096-9934}},
keywords = {{credit default swaps; implied volatility; CreditGrades; VIX; fear gauge; long-term forecast}},
language = {{eng}},
number = {{8}},
pages = {{753--775}},
publisher = {{John Wiley & Sons Inc.}},
series = {{Journal of Futures Markets}},
title = {{Credit-Implied Equity Volatility – Long-Term Forecasts and Alternative Fear Gauges}},
url = {{http://dx.doi.org/10.1002/fut.21701}},
doi = {{10.1002/fut.21701}},
volume = {{35}},
year = {{2015}},
}