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Price discovery of credit spreads in tranquil and crisis periods / Davide Avino, Emese Lazar, Simone Varotto

International Review of Financial Analysis, Volume: 30, Pages: 242 - 253

Swansea University Author: Davide Avino

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DOI (Published version): 10.1016/j.irfa.2013.08.002

Abstract

Credit spreads can be derived from the prices of securities traded in different markets. In this paper we investigate the price discovery process in single-name credit spreads obtained from bonds, credit default swaps, equities and equity options. Using a vector error correction model (VECM) of chan...

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Published in: International Review of Financial Analysis
Published: 2013
URI: https://cronfa.swan.ac.uk/Record/cronfa21587
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Abstract: Credit spreads can be derived from the prices of securities traded in different markets. In this paper we investigate the price discovery process in single-name credit spreads obtained from bonds, credit default swaps, equities and equity options. Using a vector error correction model (VECM) of changes in credit spreads for a sample that includes the 2007-2009 financial crisis, we find that during periods of high volatility, price discovery takes place primarily in the option market.
College: School of Management
Start Page: 242
End Page: 253